It’s not shocking to see this (at least for this fool) Cinema Groupof (London Stock Exchange: Film) The stock price plummeted again. Due to the Covid-19 crisis that closed cinemas and forced films to be postponed, the cinema chain lost 70% of its value in 2020. The sharp increase in coronavirus cases in recent weeks has renewed concerns that the movie world may be pushed to the brink.
Will Cineworld’s stock price fall all the way to 0p? Or should long-term investors like me use the recent weakness as a shrewd buying opportunity?
Streaming threats
It is true that I sold my assets in Cineworld at the end of last year. It’s not just the massive closure of its cinema last year that gave me heebie jeebies. As subscriptions to streaming services surge during the pandemic, my concern about the long-term threat posed by streaming services has increased.
I worry Netflix, Amazon with DisneyServices that directly enter the home may pose a terminal threat to the attractiveness of large screens. But the strong box office sales since the reopening of the screen show that the magic of cinemas is as strong as ever.
Amazing success James Bond’s latest outing No time to die Not an independent success. Since the beginning of the spring when the Covid-19 restrictions were lifted, the number of cinema attendances in all major chains has increased.
But Cineworld and its peers cannot be complacent. Change of way Movie studios distributing movies that are beneficial to anchors pose a huge threat to chain theaters. More importantly, companies like Netflix are redoubled their efforts to create exclusive content to keep viewers focused on their TV sets.Hit like Tiger King, Bridgetown And, recently, Squid game Explain the power of the anchor in setting the spirit of the cultural age.
Cinema‘s stock price is still in danger
But my biggest worry about Cineworld is whether its huge debt will drag it down if the cinema is forced to close again.
Cineworld’s share price recovered strongly at the end of 2020 and early 2021, as the business issued new shares and received new financial support from lenders. If the incidence of Covid-19 continues to climb and theaters are closed again, this may eventually prove to be just a temporary plaster.
British Health Minister Sajid Javid warned that new coronavirus infections on these coasts could reach 100,000 people every day. Encouragingly, Cineworld’s U.S. core market cases are declining, despite the discovery of a new Delta variant in the U.S. in recent days — a mutation that has significantly exacerbated the public health crisis in the UK and Europe — and may revive In danger.
As of June, Cineworld’s net debt on its books was as high as $8.4 billion. If the screen is turned off, and/or if the new social distancing measures reduce the capacity level of the theater, no one can say how the company will solve this problem.
The danger to Cineworld’s stock price in the near and future remains huge. Seeing it all the way to 0p, I won’t be shocked. So I will not use the recent weakness as an opportunity to buy on dips.
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