It’s no surprise that demand for ‘reopening stocks’ has spiked in recent months. The Cineworld (LSE: CINE) share price has quadrupled from its autumn lows thanks to successful vaccine rollouts in the US and UK.
I think that I need to be extremely careful before piling into Cineworld, however. A third wave of Covid-19 infections (like in Continental Europe) in the company’s core regions could leave its reopening plans in tatters. But a resurgent public health crisis isn’t the only reason I worry about the Cineworld share price.
There’s certainly no shortage of people who think that cinema operators’ best days are behind them. “Cinema-going will inevitably initially be at much lower levels [after the pandemic],” Richard Broughton, research director at Ampere Analysis recently told The Guardian. “The question is what level will they return to?”
Broughton’s cautiousness reflects a possible sea change in the way people watch movies and studios do business following the Covid-19 outbreak. As he comments: “There have been changes in consumer habits, with the boom in streaming, and theatre owners aren’t in the same position to put their foot down with studios over exclusivity.”
Why I’m not interested in the Cineworld share price
Clearly the prospect of a third wave of infections — and what this will mean for Cineworld’s reopening plans — isn’t the only thing investors like me need to consider. Massive changes to viewer habits pose a significant long-term threat to the Cineworld share price too. And all the while the business still has a mammoth debt pile it needs to pay down.
There are many other UK reopening stocks I’d much rather buy than Cineworld. One of these is Wizz Air Holdings (LSE: WIZZ) from the FTSE 250.
A better buy?
Some might think that the Cineworld’s share price prospects are superior to those of Wizz Air. Successful Covid-19 vaccine rollouts in the company’s core US and UK marketplaces are fuelling hopes that its cinemas can reopen soon and stay open. By contrast infection rates in Wizz Air’s European marketplaces are spiking again and vaccine programmes in the European Union remain sluggish. The majority of the Wizz Air fleet may remain grounded for some yet.
Trading conditions at the FTSE 250 airline might remain difficult until well into the second half of 2021 too. But the company has one of the strongest balance sheets in the business to help it weather these difficult conditions. A fresh share placing in March has helped bolster its financial position still further.
As a long-term investor I feel that Wizz Air has much more to offer me than Cineworld. As I say, concerns over how far the cinema industry will contract after Covid-19 dominate thinking around these types of leisure stocks. By comparison it seems like the low-cost airline market will start growing at a tremendous pace again once the Covid-19 turbulence passes. The main concern I have about Wizz Air is that it operates in a mightily-competitive space that could hamper revenues growth.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.