The Motley Fool

Cineworld’s share price: why I would, and wouldn’t, buy this UK share today

An illuminated Cineworld sign
Image source: DCM

The Cineworld Group (LSE: CINE) share price has risen a whopping 62% during the past 12 months. Compare that with the 14% increase which the FTSE 100 has enjoyed in that time.

Investors feared the worst for the cinema operators last year as Covid-19 forced them to shutter their doors en masse. The Cineworld share price suffered particularly badly as its colossal debt pile posed a risk to the company’s very survival. However, prices rose strongly from the autumn on news of successful vaccination developments and the prospect that movie theatres could fling their doors open again before too long.

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...

Looking on the bright side

However, rising Covid-19 cases in Britain means Cineworld’s share price has trended lower again in recent weeks. Does this present a decent dip-buying opportunity for long-term UK share investors? Well there are people who believe the post-coronavirus outlook for the cinema industry remains encouraging.

Analysts at Deloitte certainly believe there’ll likely still be a role for cinema in the post-pandemic landscape. They say movie theatres could experience “a strong rebound” when people feel safe to return, and that “studios will continue to deliver big theatrical experiences.”

Cineworld cinema

They went on to add that “as more streaming services vie for compelling original content, many of the showrunners, screenwriters and actors creating it are still drawn to the prestige of cinema.” Deloitte added though, that operators like Cineworld will have to adapt and demonstrate value versus the at-home market to maintain its longevity.

Why I wouldn’t buy Cineworld shares

I share Deloitte’s belief that cinema will survive the Covid-19 crisis. But I’m doubtful as to whether the global box office will return to record levels seen before the pandemic, given the fierce competition posed by US streaming giants Netflix, Disney and Amazon. This makes me question whether Cineworld can deliver the sort of returns it had in days gone by.

The experts at Grand View Research believe the video streaming market will continue to enjoy explosive growth. They predict the sector will be worth a staggering $224bn by 2028, up from $59.7bn today. They think that technological improvements (like increased use of artificial intelligence in production), along with the rapid growth of streaming on mobile phones, will drive growth. This will give the likes of Cineworld plenty to think about.

Still, the long-term future of the Cineworld share price isn’t my main concern right now. Right now, I’m more worried about the company’s running out of road in the next year or so, given its almighty debt pile. It wasn’t that long ago the UK leisure share was warning it could go out of business. And since then, the amount of debt on its books has risen.

If the coronavirus crisis spirals out of control again, Cineworld could well collapse. I’d much rather buy other UK and US shares right now.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Netflix, and Walt Disney. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.