Cineworld Share Price Forecast December 2021 – Time to Buy CINE?
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Shares of British cinema company Cineworld (LSE: CINE) are in the red today, after closing at 27.50p as of December 15th (17:50 GMT). The shares have fallen by 29% over the past 30 days and 45% in the past 6 months. This short-term fall has been primarily caused by the news of the Omicron variant and the threat it poses to the leisure sector.
Cineworld – Technical Analysis
Cineworld’s financial statement indicates that it has a market cap of £62.307 billion with total assets worth $752.818 billion. Revenue for 2020 was at £66.46 billion with a profit margin of -311.10% compared to £342.52 billion in 2019.
Oscillators for Cineworld such as Relative Strength Index (14)(18.83), Stochastic %K (14, 3, 3)(5.99), Commodity Channel Index (20)(−317.43), Average Directional Index (14)(25.66) and Awesome Oscillator(−11.8) are neutral. Moving averages such as Exponential Moving Average (10)(44.81), Simple Moving Average (10)(46.63), Exponential Moving Average (20)(49.47), Simple Moving Average (20)(50.27) and Exponential Moving Average (30)(52.57) are indicating a sell action.
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Recent Developments
Cineworld’s share price decreased by 25% on Wednesday after news broke out that the company may have to pay C$1.23 billion in legal damages. The court case was brought against the company by Canadian cinema group Cineplex. Cineworld originally agreed to pay C$2.8bn to acquire Cineplex in 2019 but abandoned the plan due to Covid. As a result, Cineplex is suing Cineworld for up to C$2.2bn in damages for breaching its obligations and duty of good faith. Cineworld’s counterclaim was dismissed by an Ontario court, which ruled in favour of Cineplex. Cineworld disagrees with the decision and will appeal the decision.
Cineworld’s most recent interim results were released back in August and contained appalling numbers. The company generated revenue of $292 million for the six months up to June 2021 compared to $700m in the same period in 2020 (which was itself very weak). Debts for the company also increased to $4.6 billion. While an appeal will provide Cineworld with some breathing room, it may have to find more than C$1 billion. This will be tough considering Cineworld’s market cap is within the £400 million to £500 million. It already has a net debt of £8.4 million and doesn’t have many assets.
Should You Buy CINE Shares?
While the share price crash has surprised many investors, it could also provide a buying opportunity for the company. It will be in the investor’s best interests if Cineworld wins its appeal and no longer has to pay damages. Even if Cineworld loses the appeal, the time that it will take for the legal process to complete could be very helpful. There is a high chance that Cineworld’s trading will return to near-normal levels in 2022 which should help it to generate surplus cash again.
Investors shave a lot of reasons to be optimistic about Cineworld, including no lockdowns in Cineworld’s biggest markets of the US and UK. Rather than choosing restrictions, both countries appear more inclined to tackle the latest variant through booster shots. As an investor, you should first see if there is a hit to the company’s business again. Given both the severity and extent of the situation so far, lockdowns won’t last as long as they did last year. Considering this now is a good time to buy Cineworld shares and them to your portfolio.
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