The Motley Fool

Is the Cineworld share price about to make a comeback?

Image source: DCM

The pandemic has decimated several industries. And one of the hardest hit is the entertainment sector. With lockdown restrictions preventing individuals from going out and enjoying various experiences, companies like Cineworld (LSE:CINE) have seen their share prices plummet as they struggle to remain afloat.

But with lockdown restrictions being eased and the vaccine rollout progressing relatively quickly, is Cineworld about to make a comeback? Let’s take a look.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The potentially bright future for the Cineworld share price

The sharp decline in Cineworld’s revenue stream was not due to a sudden lack of interest from customers. But rather from lockdowns restrictions that forced cinema doors to remain closed to the public. However, after more than a year of being stuck at home, I think it’s reasonable to say the demand to return to the big screen experience could be high. And based on recent movie performance, it seems I might be right.

In late March this year, Godzilla vs Kong vastly outperformed expectations even when an alternative streaming option was provided. More recently, the Cineworld management team released a company update that stated Peter Rabbit 2 has also beaten performance expectations and helped achieve a significant boost in concession income (popcorn, nachos, drinks and the like).

Needless to say, this is fantastic news. Today, around 97% of Cineworld’s cinemas have reopened. Combining this with the vast line-up of delayed films, the second half of 2021 could be the start of a turnaround for Cineworld and its share price. But there are still some risks to consider.

An uncertain future

The recent recovery progress made by the Cineworld management team is promising. Yet the share price has remained nearly flat on the news. In fact, since March this year, the stock has been falling. But it’s worth noting that over the last 12 months, it’s up by just over 10%. Considering the business is in a far better financial position than a couple of months ago, thanks to the income generated from new and returning customers, why is the share price still falling?

As far as I can tell, many investors are concerned about the risks the company faces today. The most prominent is an exceptionally high level of debt that surged last year as the business was forced to borrow more money to keep the lights on. 2020 also proved how susceptible the company is to lockdown restrictions. With mounting fears of a potential third-wave of Covid-19 infections, if new lockdown restrictions were to be imposed, I think the damage to Cineworld and its share price may be enormous.

The Cineworld share price has its risks

The bottom line

All things considered, my views on Cineworld are essentially unchanged, even with the latest updates provided by the management team. On the surface, the business appears to be making a swift recovery. But underneath is a feeble balance sheet that might begin to crumble if Covid-19 infection levels rise again.

I feel the risk does not match the potential reward and the share price could stay weak. And therefore, I still won’t be adding the shares to my portfolio today.

Instead, I'd much rather invest in this...

One FTSE “Snowball Stock” With Runaway Revenues

Looking for new share ideas?

Grab this FREE report now.

Inside, you discover one FTSE company with a runaway snowball of profits.

From 2015-2019…

  • Revenues increased 38.6%.
  • Its net income went up 19.7 times!
  • Since 2012, revenues from regular users have almost DOUBLED

The opportunity here really is astounding.

In fact, one of its own board members recently snapped up 25,000 shares using their own money...

So why sit on the side lines a minute longer?

You could have the full details on this company right now.

Grab your free report – while it’s online.

Zaven Boyrazian does not own shares in Cineworld. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.