So, amid the global economic environment, should I be looking to buy Cineworld shares now? Let’s take a look.

Cineworld bull case

In uncertain times, consumers tend to reduce their spending. However, the current economic condition may actually benefit Cineworld. This is because, in times like these, consumers may avoid pricey nights out, with a cheaper alternative being a trip to the cinema. And as my colleague Rupert Hargreaves highlighted, this is a trend that has proven to play out in the past.

On top of this, the firm has just begun a large marketing push in an attempt to increase footfall. As part of this, Cineworld has reduced the price of its tickets to as little as £3 in some cases. Combine this with the large success seen from box office releases such as Spider-Man: No Way Home, and it’s clear to see the potential Cineworld has to thrive this year.

Cineworld share price risks

With that said, there are a few risks to consider with Cineworld.

The most pressing is the variety of options consumers now have today. Subscription services such as Netflix provide an even cheaper option than going to the cinema, and for a relatively low-price consumers can use it repeatedly. The increasing popularity of streaming services has largely attributed to the decline of cinemas in recent times. For Cineworld, they pose a serious threat.

Another issue with Cineworld is the large debt the firm has. As of September, the business had over an $8bn debt pile. And with its full-year results due this week (17 March), it is expected this debt will still be lingering on the firm’s balance sheet. This is an issue for Cineworld for a few reasons. Firstly, it will potentially stunt growth in the future. And, with rising interest rates, this debt will become more difficult to pay off.

To make issues worse, Cineworld lost a court dispute late last year regarding its abandoned takeover of Canadian rival Cineplex. After launching a failed counterclaim, the firm has been ordered to pay over $900m. This will only further its debt issues.

What I’m doing

So, while I think the Cineworld share price has potential, I won’t be buying any shares just yet. The headwinds the firm face are too difficult to ignore. And with talks of a new subvariant of Omicron surfacing, any future Covid restrictions would have a major impact on Cineworld. Its large debt also makes the business fragile. Instead, I intend to wait until Thursday to get a better measure of the firm’s current position.

The post The Cineworld share price is rising! Here’s what I’m doing now appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shared 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.

Cineworld (LSE: CINE) shares were hit hard during the pandemic. With lockdowns enforced across the globe, the cinema chain was forced to shut its doors for months. As a consequence, the shares fell over 70% in 2020. So far, the picture in 2022 isn’t much better – the shares are down 16% in the last 30 days and over 6% year-to-date.

However, the world is steadily recovering from the pandemic, and consequently, cinema footfall is steadily increasing. This could help Cineworld rebuild its revenues and meet its heavy debt obligations. Therefore, could now be the perfect time for me to stock up on some cheap shares? Let’s take a closer look.

A good buy?

Although the current share price may not reflect it, I do see a number of positives for Cineworld shares. Firstly, it has just undertaken a massive marketing push to try and draw in consumers. Part of this has entailed cutting its prices to £3 per cinema entry, which seems like a great strategy to harness the increased footfall, and set itself aside from the competition. This growth has been supported by a number of high-grossing movies released in 2022, for example, Spider-Man: No Way Home, which was the first film to gross over $1.5bn at the box office since the Covid-19 pandemic.

In addition to this, the most recent trading update — for the six months up to 31 December — reported that group revenues had reached 88% of 2019 levels. This was a huge increase from the 50% reported in July 2021. More specifically, revenues in the US, Cineworld’s largest market, reached 91% of 2019 levels, highlighting an impressive recovery.

Obviously, the shares look cheap. But when comparing them to competition is where I see the real value. Cineworld currently trades on a mere 2.07 forward price-to-earnings ratio. Cineplex, its big competitor, trades on a forward P/E ratio of 33.4. This highlights the massive value that Cineworld shares offer.

Headwinds for Cineworld shares

While Cineworld shares look cheap, there are still some serious risks ahead of the firm.

The firm is still embroiled with a legal battle with its competitor Cineplex after the Ontario Superior Court ordered it to pay over £700m in damages in December 2021. This was mainly due to Cineworld withdrawing from a proposed takeover deal with Cineplex. After the announcement of this news, the shares fell 39% the next day. If the firm loses this battle, who’s to say the shares won’t fall by this magnitude again?

Losing this battle would also add to the enormous debt pile. In my opinion, this is something the firm’s balance sheet simply cannot afford. A primary reason for this is rising interest rates across the world, which will significantly magnify its debts.

The verdict

Overall, I am not comfortable buying Cineworld shares for my portfolio. While the shares are very cheap, I think this is because investors are realising the tough headwinds that Cineworld has ahead of it. In my opinion, it will take time for the firm to overcome these, and hence I will be steering clear in the meantime.

The post Cineworld shares are falling: should I buy now? appeared first on The Twelfth Magpie.

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Dylan Hood 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.

The volatility in global stock markets over 2022 so far is enough to shake the conviction of even the most grounded of investors. Here are a few strategies I’ve been using to ride out the storm.

1. Don’t panic-sell

When the chips are down, it’s easy to see why moving into cash is so appealing. It draws a line under the situation and allows me to move on. But does it really?

Beyond holding an ’emergency fund’ to cover, say, a sudden unexpected bill or brief period of unemployment, cash is just about the worst asset I could have right now. Low interest rates and galloping inflation means its value is gradually (or not so gradually!) being eroded. So in addition to crystallising any losses, I’d essentially be jumping out of the frying pan into the fire.

Selling up also implies that I also know when will be the right time to buy stocks again. The sheer volatility we saw on markets last week, where share prices actually rose as the Russian invasion of Ukraine progressed, tells me I don’t.

As a committed Fool, it goes without saying that panic-selling everything I own right now is not something I’m contemplating. 

2. Buy quality

Warren Buffett tells us to “be greedy when others are fearful“. I’d say right now offers me a great opportunity to put this advice into practice.

Now, it doesn’t make sense to buy any old stock on the market and expect it to recover in style. I would, for example, avoid any company lacking financial stability (such as cinema chain Cineworld). I would also steer clear of any business that lacks an identifiable advantage over competitors (such as white goods seller AO World, in my opinion). Instead, I’d be out to snap up proven ‘winners’ in their respective sectors. From the FTSE 100, for example, I remain convinced that Halma is a great growth buy. 

Aside from looking for quality businesses, there are also ways of making the buying process easier from a psychological point of view. One is buying in tranches, otherwise known as pound-cost averaging. Such a strategy helps to avoid trying to time the market exactly (which I know I can’t do, at least consistently). It also ensures at least some of my money starts working for me. 

A third element of my buying strategy is to make sure that anything I snap up is held within a Stocks and Shares ISA. This means any profits I make (and dividends I receive) are free of tax. 

3. Switch off

Assuming I’ve not sold anything in haste and bought things I’ve had on my watchlist, there’s one final solution that’s unsurpassed in helping me deal with stock market volatility. Simply, just switch off. That’s right — close off my portfolio, turn off the laptop, stop watching the news and go and do something more productive.

I have the confidence to do this because evidence shows that equities outperform all other asset classes. This includes cash (naturally), bonds, real estate and gold. The only caveat here is that this requires being invested for the long term.

For someone content to grow his wealth slowly but surely, that suits me. As distressing as current events are, I also know that “this too shall pass“. 

The post 3 Foolish ways I’m dealing with stock market volatility appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. 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.

The Cineworld (LSE: CINE) share price has climbed 20% in 2022 so far. Today, I’m asking whether this momentum can be sustained into next month and beyond.

Recovery in revenue

I’m actually not expecting all that much in the way of surprises when it comes to Cineworld’s full-year numbers on 17 March. After all, only a few weeks have passed since the company last provided an update on trading. 

In January, the battered mid-cap said performance and attendances had “steadily grown” over the six months to the end of December. In July 2021, for example, total revenue was 50% of what it had been in 2019. By the last month of 2021, this percentage had improved to 88%. Much of this increase can be attributed to popular releases such as Spider-Man: No Way Home, No Time to Die and Black Widow.

What’s far more important however, is how the company has traded so far this year. 

Cineworld share price: going higher?

On a positive note, the gradual (now complete) removal of Covid-19 restrictions over recent months can only be a good thing. Throw in the half-term holidays (and inevitably shocking British weather) and I reckon trading over the last couple of months has probably been solid, albeit not spectacular.

The slate of upcoming movies is also promising. A positive reaction from critics and fans to the new Batman film, for example, could help lift the Cineworld share price in advance of results day. Later in the year, we can expect sequels such as Top Gun 2 and Jurassic Park: Dominion.

Perhaps most importantly, there’s also been speculation in recent weeks that Cineworld will negotiate a deal with Canadian rival Cineplex over the former’s aborted deal to buy the latter. Agreeing to lower damages would actually be in Cineplex’s best interests. This is because it would receive very little (if anything) in the event of the business going bust. Avoiding bankruptcy would probably do no harm to the Cineworld share price either.

Red flags

Of course, lots of very rational arguments against investing in Cineworld remain. These include the reduced window between movie release dates and the same films being made available on streaming platforms. In fact, the rise in the cost of living also makes a monthly subscription to the latter look even better value for money than a trip to the flicks. 

Even if a deal is done with Cineplex, I also have to ask myself whether I’d want to own a stake in a company with such a horrific balance sheet. To be frank, there are so many far more robust businesses to choose from in the UK market.

20% up, but…

While the recent momentum might be welcome for those already holding the stock, we need to keep things in perspective. The Cineworld share price is still down 60% in the last 12 months. In the last five years, the company’s value has tumbled 86%.

I don’t think this pessimism is unjustified. And while there are certainly reasons for thinking that the stock could continue rising in March and beyond, I’m still not inclined to get on board even if it does.

If that means me missing out on the mother of all recoveries, so be it. The potential returns aren’t worth the stress of the journey, in my opinion. 

The post Is the Cineworld share price too low ahead of results? appeared first on The Twelfth Magpie.

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Paul Summers 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.

Some FTSE stocks attract short-sellers like bees to honey. Think battered cinema operator Cineworld or troubled white goods seller AO World. That said, there are other companies where this kind of attention is arguably more surprising. Let’s look at a couple of examples and see whether there’s a buying opportunity for me. 

Is the purple patch over?

It’s interesting to see Kingfisher (LSE: KGF) so high up the table of most hated stocks. Thanks to the explosion in the popularity of DIY over the pandemic and a very healthy housing market, investors might assume that short-sellers would have no interest in the B&Q and Screwfix owner. Then again, recent share price activity suggests otherwise.

Kingfisher certainly hasn’t had the best of starts to 2022. In sharp contrast to index peers like BT and BP, the valuation here has fallen 10% year-to-date. That’s not nearly as bad as the drops seen in tech companies, but it still implies that some in the market think the FTSE 100 member’s purple patch might be over.

Given the above, it’s clear that next month’s full-year results will receive a lot of attention. Back in November, Kingfisher’s share price wobbled after the company revealed like-for-like sales of £3.2bn in Q3 were down 2.4% compared to the same period in 2020.

Is this indicative of more people spending money on other things they couldn’t do previously? Or is it simply a natural fluctuation in earnings that all companies experience? We’ll find out soon enough.

In the meantime, Kingfisher’s stock was trading on a P/E of 11 as markets opened. It also comes with a 3.7% yield. That looks pretty reasonable to me. As things stand however, I’m content to sit on the sidelines and wait to see just how tricky the last quarter has been. 

Shorting target

Another FTSE share that makes the ‘most hated’ Top 10 list is Domino’s Pizza (LSE: DOM). Again, this seems a bit surprising.

Back in December, the company announced it had reached a resolution to a long-running feud with its franchisees. As part of the deal, Domino’s will invest £20m over three years in stores and online apps. Marketing will also be stepped up.

In return, franchisees are expected to open a minimum of 45 stores per annum in the next three years, test and roll out new tech, and get involved in national promotions.

As might be expected, this news sent the shares sharply higher. Unfortunately, a good proportion of these gains have since been lost. Shares have fallen back 16% year-to-date.

But maybe this selling pressure (and shorter interest) does make sense. Like Kingfisher, the trading tailwind from multiple UK lockdowns is now over. The sharp rise in the cost of living could also be relevant. When times are tough, it seems likely that more of us will shun a takeaway in favour of a cheaper, shop-bought alternative. 

As a side note, Domino’s net debt has climbed significantly in recent years. I’d prefer it to be going in the other direction.

But companies with franchise business models often prove to be great wealth-compounders over the long term. Domino remains a highly-cash-generative business and P/E of 19 is also roughly in line with the company’s average P/E over the last five years.

Domino’s has now been added to my watchlist. I wonder if this attention from short-sellers might prove short-lived.

The post 2 surprising FTSE shares being targeted by shorters appeared first on The Twelfth Magpie.

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Paul Summers 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.

It wouldn’t be inaccurate to claim that Cineworld (LSE: CINE) was one of the worst-affected companies by the outbreak of Covid-19. But for 2022 and beyond, could the present Cineworld share price be too cheap for me to ignore?

Possible positives

I love going to the movies and have missed doing so during the pandemic. Nothing quite compares to the sights and the sounds in a dark cinema. The reopening of cinemas, as well as a slate of long-delayed blockbuster releases, should be the shot in the arm Cineworld needs. Recent blockbuster films like Spider-Man: No Way Home and No Time To Die have helped to drive income levels above those seen before the pandemic.

Movies can generate a lot of cash. It’s not uncommon now for the big franchise releases to pull in between $500m and $1bn each, and 2022 has a lot of big releases still to come. There’s a new Marvel film, another Spider-Man, and I can’t wait to see the new Batman movie. But, despite the blockbusters released over the past few months, Cineworld’s share price has remained low. I wouldn’t be surprised if this was due to fears of more lockdowns, but those seem less likely each passing day.

Cineworld’s share price woes

So what else is holding the share price back? Cineworld’s shares were on a pretty consistent downtrend even before the pandemic. In February 2019 they were trading at 259p but fell to 181p in early 2020 before the pandemic even hit in the UK. Last year they slipped to 74.22p but have fallen even further to a low of 35.83p as I write. I certainly feel sympathy for those who bought the shares in 2018. I might be tempted by this low price alone. Warren Buffett has always stressed buying stocks when they’re cheap or ‘on sale’. But I’ll admit I’m still hesitant.

To stay afloat in the pandemic, Cineworld had to borrow billions. A business with high debt, inconsistent performance, and uncertainty ahead of it doesn’t usually see great share price performance.

The entertainment market is also very competitive. Covid-19 has accustomed many of us to lounging on our sofas and indulging in streaming services like Netflix and Disney+. As much as I love the cinema, watching films from home is much more convenient and far cheaper. The growth of these platforms may pose a long-term threat to Cineworld.

On top of that, while big-screen releases are great for cinema chains, they only get to take a share of ticket sales. A significant portion goes back to the film studio. In the case of big franchises, that can be more than 60%.  In addition, competition with other cinema chains in the UK means Cineworld faces an uphill battle.

Final thoughts

I don’t think Cineworld is the investment for me. I think that with careful management the company could turn things around. But there’s so much stacked against it right now that I don’t feel comfortable adding it to my portfolio.

The post Is the Cineworld share price too cheap to ignore? appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
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James Reynolds 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.

Cineworld (LSE: CINE) shares have climbed over 30% in value since the start of 2022. That’s not something I can ignore, especially as I’ve been bearish on the company for as long as I can remember.

Does the stock’s resurgence over recent weeks mean it’s now far too cheap and that there’s money to be made? Possibly. That said, there’s another company I’d be far more interested in buying right now.

Cineworld shares: Mission Impossible?

To be fair, Cineworld’s last update was actually better than I expected. Attendances had “steadily grown” over the six months to the end of 2021, no doubt boosted by the release of the long-awaited No Time to Die. The latest Spider-Man movie has also helped to improve revenue, allowing the company to generate positive cash flow again. 

The forthcoming slate of movies should build on this momentum. The new Batman film, releasing in March, Jurassic Park: Dominion, out in June, and Mission: Impossible 7, debuting in September, should be nailed-on blockbusters. The removal of Plan B restrictions in the UK, including the requirement to wear face masks, could/should prove another shot in the arm for Cineworld shares. 

But let’s be sensible. When it comes down to it, the odds of this business thriving again aren’t great. Even if Cineworld is successful in its appeal against the legal case it recently lost against Cineplex, the sheer amount of debt on the company’s books is a huge reason to steer clear.

The fact that it’s still the most heavily shorted stock on the entire UK stock market is another. Now throw in the competition it faces from streaming services. Speaking of which… 

Taking the Mickey 

If I were to buy a recovery play in the entertainment space right now, it would be US giant Disney (NYSE: DIS). Priced at a just over $200 a pop last March, the stock now changes hands for under $150. 

Reasons for this weakness include a slowing of growth at its streaming platform. Last November, Disney+ announced it had added 2.1 million subscribers in Q4 of its financial year. That’s down sharply from the 12.6 million in the previous three months.

But should investors really be surprised? Having (unintentionally) timed the launch of Disney+ perfectly to coincide with Covid-19 lockdowns, it was surely inevitable that things would slow.

Yes, a few poorly-received recent Marvel and Star Wars shows may be another factor. However, we can’t deny just how lucrative this intellectual property is and, importantly, will remain. Pixar is another jewel.

For me however, its the theme parks that make Disney a buy. If the pandemic really is to end in 2022, visitor numbers should begin to rise again as international travel bounces back. Sure, a bet on Cineworld could be more lucrative in the event of a short ‘squeeze’. However, I suspect the ride with Disney stock will be considerably less hair-raising.

High-risk stock

In sum, I’d much rather add Mickey and Co to my portfolio when markets reopen on Monday. As nice as it would have been to capture the recent jump on Cineworld shares, I’m still aiming my barge pole at the company.

This is a binary bet as I see it and the prospects for long-term investors, as opposed to nimble traders, aren’t great. 

Full-year numbers — including an update on its precarious financial position — will arrive in mid-March. 

The post Cineworld shares are flying but I think this stock is a better recovery play appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
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Paul Summers 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.

The Cineworld (LSE: CINE) share price took a beating after the world was forced into lockdown by the Covid-19 pandemic. However, cinemas everywhere already faced a challenging future and the pandemic has accelerated trends that were already taking root.

Business challenges

Many of us are familiar with the cinema experience. We turn up, pay a bit too much for our tickets and consider buying some overpriced popcorn, then decide to sneak in some sweets from Tesco instead. Next we find our seats in the dark, sometimes overcrowded, auditorium, then somehow strain to see the picture on the enormous screen before us. I usually forget about these minor inconveniences and enjoy being sucked into an incredible story. But everything I have mentioned above represents a significant challenge to the profitability of cinemas around the world.

Popcorn prices are so high because cinemas have to share a third of ticket sales with the studios. This cut can be higher if the studio is large and the film is a highly anticipated ‘tentpole film’.

Big studios usually have contracts with cinema chains regarding how long a particular film is to be shown on large screens. This restricts a cinema’s ability to diversify its income with films from less demanding distributors. Not that it matters. Those smaller films usually go directly to streaming services, cutting out cinemas entirely.

Cineworld is the second largest cinema chain in the world, but that doesn’t mean it’s immune to these challenges.

The share price crashed after the company was only able to bring in $1.1bn in revenue in 2017. Then, despite bringing in $4.1bn in 2018 and $4.4bn in 2019, the stock traded sideways until crashing again at the start of the pandemic. Even when it was doing its best in late 2019, Cineworld was operating with only a 4% profit margin.

The company has more bargaining power than independent cinemas. But it’s still being squeezed between large American studios and the changing habits of filmgoers.

Pandemic changes

Customers were already more likely to stay at home than go to the cinema before the pandemic. This is in part due to the aforementioned high ticket prices, but streaming services are cutting deep into cinema sales. Streaming allows us to watch some amazing films without leaving our sofas and many television dramas are of equal or better quality than what is usually available at the cineplex.

One of the most significant decisions of the pandemic was Warner Bros choosing to release its large slate of tentpole films both in cinemas and on its streaming service (HBO Max) at the same time.

Releasing on an in-house streaming service makes a lot of sense for a studio. It cuts out ticket sharing with cinemas entirely and forms a new captive customer base that pays for a subscription every month.

Cineworld may be able to benefit from pent-up demand in the coming months. And we’ve already seen with the latest James Bond how keen consumers are to watch some movies in cinemas. But as we saw in 2018, even increasing revenues by nearly four times had a negligible effect on the share price.

Conclusion

Cineworld faces some serious challenges in the future. I don’t think this means cinemas will vanish. But I do think that adding Cineworld shares to my portfolio would be a very bad idea.

The post The Cineworld share price has more than Covid to contend with appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

James Reynolds does not have a 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.

The Bond effect

While the recovery in the Cineworld share price can probably be attributed to a number of factors, the forthcoming release of No Time to Die is surely the main cause. Having been delayed multiple times by ‘you-know-what’, the 25th James Bond movie will hit the silver screen this Thursday. Understandably, management’s banking on its release being a catalyst for a revival in Cineworld’s fortunes. 

Despite some anxious pre-release chatter, I can’t see the film not being a success. This should be great news for CINE and, you’d suspect, its owners. Goodness knows they’ve suffered over the last couple of years! Despite its recent rally, the Cineworld share price is still 70% below where it stood in 2016.

Other reasons to be bullish

In a recent article by The Times, CEO Mooky Greidinger declared that “cinemas aren’t going anywhere” and that going to the movies was “still the most affordable form of entertainment today.” He then went on to highlight the social aspect of going to the cinema with friends.

Naturally, you wouldn’t expect the leader of a major cinema chain to say anything different. Even so, nothing here sounds controversial. Moreover, the slate of film releases looks in far better health. Top Gun 2, Dune and Matrix 4 are all on the horizon. Colder weather should also begin pushing more people towards its sites.

On the other hand…

But let’s be honest. Even if all of the above come to fruition, I think it’s fair to say Covid-19 has succeeded in changing the movie business forever.

The permanent shortening of the ‘cinematic window’, for example, would surely be bad news for CINE. Even if movies continue to be released on the big screen first, the precedent set during the multiple lockdowns has only served to adjust consumer expectations. It’s another reminder that all business is based on the removal of friction.

Levels of executive pay is another thorny issue. While I expect those in charge to be suitably rewarded for steering a company through tough times, the bonus scheme announced in January left a nasty taste. Based on this, Greideinger takes home £33m if the share price hits 190p in three years. That doesn’t sit well with me given how staff were treated in 2020. 

That also looks like a tough target given the shedload of debt the FTSE 250 stock carries. For its part, CINE believes it can successfully address this burden in time. Whether this involves a mooted US listing or not, that’s a big weight to be carrying around in a very uncertain world. 

Cineworld share price: 100p-bound?

Assuming we don’t see a resurgence of Covid-19, I think there’s a good chance (but no guarantee) the Cineworld share price could breach 100p soon. This would give new holders a gain of around 25% from here. 

Even so, I’m still convinced CINE stock just isn’t for me. There are simply too many question marks surrounding its long-term future to make me think it will hit that three-year target without a big (Bond-esque) struggle against an unpredictable Mr Market.

The post The Cineworld (CINE) share price has exploded. Next stop 100p? appeared first on The Twelfth Magpie.

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Paul Summers 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.

Since peaking in mid-March at 122p, Cineworld (LSE: CINE) shares have lost 50% of their value. It was expected that the Cineworld share price would boom as lockdowns eased, however, this doesn’t seem to have been been the case. There are a few reasons why this dip could be a good buying opportunity for my portfolio, but there are still long-term risks ahead of the UK multiplex cinema chain.

Pandemic problems

Cineworld shares were hammered by the pandemic. With multiple UK lockdowns, the cinema industry ground to a halt. The 2021 half-year results highlight the continued strain on the firm. Revenue came in at just $293m with a loss before tax of $659m. In addition to this, monthly cash burn was around $45m. Net debt also increased by $81m, reaching $4.6bn.

Another problem the pandemic brought to the fore is the dominance of streaming services such as Netflix and Amazon Prime. As my fellow Fool Gemma Blackwell pointed out, film viewing is now twice as likely on one of these platforms as it is in a traditional cinema. Moving forward, Cineworld will need to find ways to overcome this competition if it wants to stay afloat in the market.

Cineworld shares: bull case

That being said, there are a number of reasons I think Cineworld shares could rise in the shorter term. As we continue to move out of the pandemic, it’s likely that customer demand will pick up again. In fact, Cineworld has already reported attendance figures reaching 50% of pre-pandemic levels. I expect this demand to continue picking up throughout the remainder of 2021.

Another factor driving demand is the line-up of new releases Cineworld has coming up. This is due to a Covid-related backlog of new films from franchises such as The Matrix and James Bond. With many of these films being released exclusively to Cineworld, this sets it aside from online streaming services.

The firm has also been able to effectively rebuild its balance sheet having secured an additional $213m in liquidity. This liquidity will be issued in addition to over $800m secured during the pandemic. While this increases long-term liabilities, it allows the firm to more quickly recover from the virus’s impacts. I expect this to help Cineworld shares in the short term.

The verdict

Cineworld has a long way to go before I would consider adding its shares to my portfolio. The excessive financial strain on the firm won’t be permanently lifted by a temporary increase in demand. In addition to this, I don’t think Cineworld will be able to compete with online giants Netflix and Amazon much longer. Although liquidity help is good in the short term, it only places more strain on Cineworld in the long run. 

The post Should I add Cineworld shares to my portfolio today? appeared first on The Twelfth Magpie.

More reading

• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

Dylan Hood has no position in any of the shares mentioned in this article. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Netflix. 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.