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The Cineworld share price is falling! Is now the time to buy?

An illuminated Cineworld sign
Image source: DCM

The Cineworld (LSE: CINE) share price has fluctuated significantly during 2021. The success of the vaccine program in the UK at the start of the year pushed the price in a positive direction. It even reached a high of 122p on 19 March, but now it has dropped to less than half of that price at 64p. 

So what has changed? Despite restrictions being lifted, movie goers are still anxious about sitting in one big room together. The new delta variant has been an additional twist in the story and has stunted Cineworld’s initial plans for recovery. 

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Despite this, I think Cineworld at 64p is undervalued. There could still well be a renaissance in the return to the movies if infection rates drop and the vaccines keep rolling out. Here’s why I’m thinking it might be an opportune time to buy Cineworld shares for my portfolio.

May the Pfizer be with you

From January 2021 to March, the Cineworld share price jumped up by more than 163%. Evidently there was a lot of expectation that Cineworld could recover from the pandemic, by investors and me included. Unfortunately, due to the emergence of the delta variant, those early predictions turned sour quite fast. It became apparent to me that the overall recovery might be a lot slower than first imagined. 

But while the share price continues to fall, so too do the number of Covid-19 cases. This is why I believe it could be an opportune time for me to buy shares in Cineworld. 

I also believe that many cinema goers are itching to get back to the big screen. Personally, I used to love going to the cinema and would go at least once a week. I think this demand is just bubbling at the surface for the moment and hopefully there will be further data showing a continuation in the decline of cases.

The pandemic awakens 

While I am hopeful that the Cineworld share price will bounce back in 2021, I am not ignorant of the devastation that shook the cinema industry because of Covid-19. 

Five years ago the share price was trading at 260p, whereas it is now at 64p, which is a 75% drop in price. If you take a look at Cineworld’s financials and balance sheet, they are also far from encouraging. Revenue dropped by almost 80% between 2019 and 2020. Further, average annual cinema-spending per head population in the UK dropped from £18.72 in 2019 to just £4.37 in 2020. 

Needless to say, the recovery for the cinema industry will prove to be a mountain to climb. 

A new hope for the Cineworld share price

However, I believe, eventually, there will be a return to the cinemas and the recent statistics show that a future evening in front of the big screen might not be that far away. 

With the Cineworld share price being in my opinion seriously undervalued at 64p, I think this could be a very intriguing stock to keep an eye on and so I am very tempted to add Cineworld to my portfolio. 

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John Town has no position in any of the shares mentioned. 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.

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