The Cineworld (LSE: CINE) share price has been through choppy waters in recent times. After a steady rebound from the pandemic depths of 2020, its shares stood at 122p in March 2021. But another Covid outbreak caused the Cineworld share price to tumble again to the 60p level in July. This caused analysts to question the recovery potential of the business.
But, with the UK now reopen and a spate of exciting releases in the pipeline, Cineworld shares have been rising quickly. Shares are up 13% in the last month. Is this the turning point for the theatre group? Let’s find out.
A big point of debate that surrounds the Cineworld share price is the surge in popularity of streaming and video-on-demand services across the world. Analysts expect a big drop-off in the number of cinema-goers given the convenience and price-point of streaming at home.
Big studios too seem to be aware of the potential of subscription video services. Warner Bros recently released a statement that said that all 2021 titles will be concurrently released on HBO Max (for one month) along with the theatrical release. Also, Universal Studios recently signed a deal to shorten the theatrical window. Now, streaming platforms could have access to new releases in 17 days.
Hollywood to the rescue?
But, big-name releases are bringing people back to theatres, evident from a string of Hollywood productions enjoying success through theatre ticket sales alone. Releases like Free Guy and Marvel Studio’s Shang-Chi and Black Widow have all been deemed super hits, grossing over $300m each.
Big franchise releases like James Bond No Time to Die and F9 show how movies can still attract large audiences to theatres, which is the best possible news for Cineworld shareholders.
Cineworld share price concerns
The debt acquired during the pandemic stands at an enormous $8.4bn (as of June). This will prove a huge hurdle over the next few years, even if yearly revenue hits pre-pandemic levels again.
And this is where I have my doubts. Even though the potential of big releases cannot be doubted, it looks to me like the theatre industry has taken a permanent hit in foot traffic. With the popularity of streaming services like Netflix and Apple+ and big studios like Disney opting to launch their own platforms, things look dicey to me.
I see a future where every major Hollywood releases can be purchased on the day of release for at-home viewing, in a sports-like pay-per-view fashion. With incredible 3D technology and audio systems now available to consumers at home, I expect the theatre experience will continue to diminish in value. Also, if there is another Covid breakout, the recent momentum Cineworld gained will come to a screeching halt.
Also, the Cineworld share price slid 6.5% in the last week and looks like a turbulent investment to me. It looks to me like the FTSE 250 stock has a lot of issues to overcome. Although it could break the 100p barrier soon, there are too many risks with Cineworld shares right now for me to consider an investment.
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Here’s my verdict on the current Cineworld share price
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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Netflix. 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.