Cineworld Share Price Forecast August 2021 – Time to Buy CINE?
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Shares of British cinema company Cineworld (LSE: CINE) is currently trading around the 63p mark after experiencing quite the volatility throughout the year. The shares which were at one point over 120p in 2021 have interested many investors who think this could be a buying opportunity for them.
Cineworld – Technical Analysis
According to Cineworld’s financial statement, its market capitalisation is at £860.319 million with total assets worth £7.528 billion. Cineworld recorded revenue of £664.64 million with a profit margin of -311.10%, compared to £3.43 billion earned in 2019.
Moving averages for Cineworld such as Exponential Moving Average (100)(77.67), Simple Moving Average (100)(84.68), Exponential Moving Average (200)(80.35) and Simple Moving Average (200)(78.13) are pointing towards a sell action. Oscillators such as Stochastic %K (14, 3, 3)(32.62), Commodity Channel Index (20)(−49.35), Average Directional Index (14)(23.36) and Awesome Oscillator(−5.36) are all neutral.
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Recent Developments
Cineworld’s box office sales were down by 61.9% to reach £21.8 million. Revenue received from drinks and popcorn also dropped by 56.1% to reach £9.3 million, despite average spend per customer increasing by 62%. This was one of the reasons why the company hicked the average price of tickets by more than 40% when it reopened following lockdowns. Cinema screens were one of the last places which were allowed to fully open last May, with heavy restrictions in place. Despite financial difficulties, the company’s £65 million bonus package also received criticism from the public. The company also came quite close to collapse in November before securing several loans.
Cineworld is embroiled in legal problems as Cineplex Inc. has filed a lawsuit against it. Cineplex has sought damages over the former’s failed acquisition, which could exceed over $2.18 billion. Cineworld walked away from acquiring Cineplex for $2.8 billion on June 12th, citing material adverse effects and breaches by Cineplex. Cineplex is seeking $2.18 billion in damages and an additional $664 million compensation for the debt and transactions that would be applied if the deal went through.
Cineworld acquired the US cinema group Regal Entertainment in 2018 which gave the company access to the entire North American market. The market has been a major source of revenue, especially that from the United States. However, the company is now considering either a US listing of Cineworld or a partial US listing of Regal. The company has pointed to the liquidity in the US equity markets as a reason for this decision.
Should You Buy CINE Shares?
Cineworld released its interim results last week which weren’t great. This period coincided with cinemas being closed due to Covid-19, which decreased its revenue by 58.9% to reach $292.8 million. While it incurred an operating loss of $208.9 million, it was much smaller compared to last year’s loss of $1.3 billion. The company attributed these losses to reduced asset impairment reversals as a result of lease modifications.
Cineworld’s net debt stood at $8.4 billion as of the end of June and its leverage has soared during the Covid-19 pandemic. The company’s recovery after the Corona crisis depends on how well it’s managing its debt burden which can affect its share price. While its US stock market financing possesses no guarantee, it has to try to on behalf of its shareholders, especially since its avenues of accessing liquidity have been exhausted in the United Kingdom. Even though the share price has been volatile, its ballooning debt pile will certainly drive away investors who shouldn’t buy the stock yet.
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