Can the End of Lockdowns Turnaround the Fortunes of Cineworld Group?

Can the End of Lockdowns Turnaround the Fortunes of Cineworld Group?

Cineworld Group is a movie theatre company listed in United Kingdom’s capital London.

It ranks as the world’s second-largest cinema, and has cinemas in seven countries including;

• Ireland,
• Israel,
• Romania,
• Slovakia,
• the United Kingdom and;
• the United States.

Though most of their profits come from sales generated in the UK and the USA.

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Cineworld Group (LSE: CINE) $CINE is listed on the London Stock Exchange.

During the covid-19 pandemic, CINE was one of the worst performing stocks, despite its commercial success pre-covid-19, which makes it a wonderful stock to buy and hold long-term if you believe it can recover.

I took a fresh look at the latest news and satisfied myself that, CINE is a must buy stock as it holds a lot of opportunity for steady growth over the long-term.

Shall I add CINE shares to my portfolio in hope of a getting rich quicker?

Let’s look at some fundamentals below.

Cinema Life is a Must for People

Covid-19 was a disaster for outdoor actives and cinema goers.

But there’s light at the end of the tunnel. Cineworld said box office and revenues rose to 87% of 2019 levels in December.

The recovery was one of the strongest in the key U.S. market, where cinema revenues surged to more than 80% of pre-pandemic levels.

Removal of lockdown led to strong attendance due to an impressive release of new films, including Spider-Man and, James Bond’s, No Time to Die.

I’m confident this recovery for CINE will continue. Release of upcoming blockbuster movies are expected including;

• the new movie, Batman Returns,
• Top Gun and;
• Jurassic World titles.

Massive Debt A Problem?

Trading update on Friday was terrible on financial detail. The company didn’t provide any promise on whether its 2021 revenue reached expectations.

However what we know for sure, is that Cineworld generated positive cash flow during the final quarter of 2021.

But to be honest, we know also that 2021 was terrible for all outdoor businesses, such as retail shopping and cinemas.

But, moving forward, what matters most is the outlook for 2022 and 2023.

Many top bank forecasts might suggest that Cineworld’s recovery will accelerate this year.

With generation of more than $400 million cash flow in the upcoming quarter might allow CEO, Mooky Greidinger to repay some of the group’s $8 billion net debt.

If the recovery happens as per the plan, I believe Cineworld shares might turn out to seem very cheap, a massive discount at current levels.

Its 40,000 staff were offered unpaid leave during the Covid-19 pandemic.

The financial statement showed it was burning cash, due to its massive debt problems that might worsen if Cineworld can’t manage to see a valid recovery which then could lead to bankruptcy.

Final Verdict?

Cineworld’s share price is near an all-time low over the last decade, yet they have good locations and screens in many countries.

One problem is due to the compulsory paying of their rival Cineplex some C$1.2bn in damages as a result of a failed acquisition deal.

The UK company is appealing that verdict and holds out some hope of winning. But if Cineworld loses its appeal, then it may need to raise more money from investors.

For me, this situation is not much of a gamble since the stock is already near its all-time low and the risk ratio is very small compared to the potential reward.

If everything goes smoothly for  Cineworld and lockdowns are not once again implemented, I think the share price for CINE will be much higher within 2 years from now.

OVERALL SUMMARY

What Other Analyst Thinks Overall?

Research analysts from Wall Street have issued a “buy and hold” signal for this stock. There is currently only 1 sell rating and more than 5 hold ratings for CINE.

This indicates investors should “hold” the Cineworld Group stock.

A hold rating indicates that the current share price may be the floor and the share price might move upwards but not much downwards.

Impact Of Covid-19

Cineworld Group’s stock was trading over 1 GBP before April 2020 until COVID-19 (Coronavirus) led to total lockdowns.

From then, CINE stock has decreased by more than -60% and is now trading at 0.4 GBP which makes this an undervalued stock.

However recently Cineworld Group’s boss said that the pandemic recovery is in full swing and might propel CINE to normal pre-Covid-19 revenue levels if not higher.

What Is The Price Target Set For Cine By Analysts?

More than 5 analysts have issued 1 year price targets for Cineworld Group’s shares.

Their forecasts range from 0.6 GBP to 1.2 GBP. On average, this suggests a possible upside of more than 100% return from the stock’s current price.

Can the End of Lockdowns Turnaround the Fortunes of Cineworld Group?

The stock is currently trading at 0.41 GBP (22 January 2022) a share price which is near its all-time low over the last five years.

The covid situation is the main factor for the decrease in revenues.

Despite people wanting to go to cinemas the pandemic boosted the watching of movies at home served by companies like Netflix.

Since lockdowns have been removed in most countries CINE operate, the share price of Netflix began to fall and this gives hope for CINE investors to hold on to Cineworld shares.

It’s possible the CINE share price could rise to 1.5 GBP in the not too distant future which would be a huge profitable return.

This is a great stock to buy and hold given the risk is pretty low compared to the reward ratio.

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