Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Cineworld shares set to slump after AMC-Universal deal

Shares in the world’s second largest cinema chain look likely to return to March lows after AMC Entertainment and Universal pictures sign deal that reduces films run times in theatres

Cineworld Source: Bloomberg

Shares in Cineworld look likely to return to March lows after AMC Entertainment and Universal Pictures sign deal that reduces films run times in theatres – overhauling an old business model that could hurt cinemas earnings.

The deal essentially shortens the exclusivity of all films produced by Universal Pictures and Focus Features from 75 days in theatres to just 17days, after which the studio is allowed to screen its titles across premium on demand (PVOD) platforms like Netflix, Amazon Prime Video, Disney+ and Hulu.

This new arrangement means that film fans will only have to wait a two and half weeks rather than months to watch their favourite movies from the comfort of their home, which could see cinemas popularity wane.

‘The theatrical experience continues to be the cornerstone of our business,’ Universal Pictures chair Donna Langley said in a statement.

‘The partnership we’ve forged with AMC is driven by our collective desire to ensure a thriving future for the film distribution ecosystem and to meet consumer demand with flexibility and optionality,’ she added.

AMC-Universal deal represents ‘paradigm shift’, says Morgan Stanley

The new deal between AMC Entertainment and Universal Pictures is the ‘crystallisation’ of the worst case scenario for Cineworld, according to a recent note from analysts at Morgan Stanley.

The US-based investment bank had previously calculated that the rise in PVOD platforms represents a potential 10% to 30% threat to EBITDA for Cineworld, with earnings likely to be hit even harder this year due to lower-than-expected revenue and profit for cinemas as a result of Covid-19.

Morgan Stanley admitted that other studios and movie theatres were likely to replicate deals similar to AMC Entertainment and Universal Pictures, ‘ending a decades old theatrical model’.

‘AMC is the largest US exhibitor, and it is hard to see this paradigm shift not being replicated by other studios and exhibitors such as Cineworld,’ Morgan Stanley added.

However, AMC Entertainment believes that its deal with Universal Pictures is a win-win situation that will help improve the profitability of both theatres and film studios.

‘We are participating in the entirety of the economics of the new structure, and because premium video on demand creates the added potential for increased movie studio profitability, which should in turn lead to the green-lighting of more theatrical movies,’ AMC Theatres CEO Adam Aron said.

Cineworld shares fall further than Morgan Stanley forecast

Analysts at Morgan Stanley clearly saw the writing was on the wall for Cineworld and its peers back on 1 June, downgrading it to ‘underweight’ and slashing its target price for the stock from 180p to 60p per share.

On 1 June, Cineworld was trading at 79p per share, with Morgan Stanley’s price target representing a potential downside of 24%.

However, the beleaguered cinema chain has seen its share price shed more than 50% of its value since then and looks capable of returning to March lows where it hit 21p per share.

Cineworld is trading at 38p at the time of publication, with the stock down 82% year-to-date.

How to trade stocks with IG

Looking to trade the Cineworld and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Cineworld’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access
Learn more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.