Blockbuster surge for Cineworld at risk ahead of earnings?

Cineworld has been a huge beneficiary of the arrival of Covid-19 vaccines, but can it keep the momentum going into the rest of 2021?

When does Cineworld report earnings?

Cineworld reports earnings for the full-year (FY) on 25 March.

Cineworld earnings – what to expect

The headline loss per share is forecast to be 7 cents, while revenue is expected to slump 77% to $1 billion.

A $750 million rescue package meant that Cineworld was around to publish FY results, something that seemed unlikely at several points last year. But having soared since the lows of October thanks to the arrival of Covid-19 vaccines much of the good news has already been screened and now the focus is on whether the recovery will be as strong as expected.

The pandemic drove a huge rise in the amount of online streaming by consumers, who also signed up for services like Netflix and Disney+ in droves. Will they want to come out to cinemas having already forked out subscriptions for the above channels, while also having to sit in enclosed spaces with masks on? A bounceback in activity is inevitable, but is it enough to justify the current surge in the share price, or will investors book their gains and exit the film?

How to trade Cineworld’s earnings?

Cineworld has beaten earnings forecasts in five of the last eight reports, but only in four of the last eight for revenues. Ten analysts cover the stock, with three ‘buys’, five ‘holds’ and two ‘sells’, and the median target price of 73p is a 37% discount to the 19 March closing price of 116p. The share price moves by 4.9% on average on results day.

Cineworld shares – technical analysis

The share price hit a 13-month high last week, moving above 120p for the first time since February 2020. The post-October uptrend is still very much intact, the shares having remained in an ascending triangle over the past five months. Any dip could find support at the lower bound of the channel, or further down to the 85p zone, or even towards the 70p zone that was support in February.

Can Cineworld keep the show on the road?

Like many names hit hard by the pandemic, Cineworld has bounced back. But it is no longer in the bargain DVD basket, having surged 600% from the October low. Price action continues to support a bullish view, but the outlook depends on how the summer releases perform and the willingness of customers to return to cinemas, two highly-uncertain aspects.

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