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Can Cineworld’s share price recover from dramatic year?

Can Cineworld’s share price recover from dramatic year?

As Cineworld prepare to release their latest results this week, the numbers are expected to reflect a dramatic year of highs and lows for the Cineworld share price. As Covid-19 was just beginning to take hold, the world’s second-largest cinema chain had already backed out of the $2.1bn Cineplex deal which prompted controversy and put Cineworld under threat of legal action.

Covid-19 hits the Cineworld share price

While the abandoned acquisition may have been a drama, the rest of the year has descended into horror for Cineworld. The Cineworld share price dropped to a record low of 21.38p in March, down 90% since the start of year. There’s been a recovery of sorts, with Cineworld’s share price rising an impressive 23% in the space of one week in late August, hitting 63.08p per share. It has since dropped back to 43.67p, far below below the 320p peak of May 2017.

The global pandemic is of course at the centre of this, as the majority of Cineworld’s 9,500 theatres were forced to close as Covid-19 spread across the world. In the UK and Ireland alone, 99 cinemas with over 1,000 screens were locked down in March, with many staff placed on the government’s furlough scheme.

Distancing measures a deterrent?

Even as doors opened in August and films began to show, there were concerns over whether customer numbers return to levels previously seen, with the impact of PPE requirements and new Covid-19 restrictions on screen capacities. The successes of Disney and Netflix, reported in recent weeks, shows that the pandemic has also galvanised the threat that home-streaming poses to cinemas. Disney moved their summer blockbuster Mulan directly to its streaming service, albeit at an added price.

Despite these concerns, Cineworld CEO Mooky Greidinger has been happy with footfall so far: “We were very pleasantly surprised with the numbers. People really missed the cinemas and wanted to go back to the big screen.” The company have reported sold-out showings, with the caveat that these are measured as “today’s sold-out”, accounting for the capacity restrictions brought about by social distancing. Greidinger has also reported a positive response to these precautions: “The reaction to our safety measures has been amazing. People really appreciated it. They felt safe.” Those with an interest in the Cineworld share price will certainly hope that these positive audience numbers continue.

A twist in the tale?

This saga took on an added twist in August, amid speculation that Cineworld, or other cinema chains, could be the subject of a takeover bid from a big Hollywood studio. With footfall at record low levels, and likely to remain subdued, there are significant obstacles to a potential takeover, not least how to accurately predict future cashflow in a post-Covid world.

Cineworld’s share price has taken a battering over the past 12 months, however the main reason for the weakness, coronavirus concerns notwithstanding, is the level of the company’s debt which along with its modernisation programme has placed an enormous strain on its balance sheet.

The chain will release its results on Thursday 24 September. What will the latest release mean for the Cineworld share price?

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