Cineworld shares precarious with potential easing of Covid-19 restrictions
The Cineworld share price has shown impressive resilience in 2021 thus far. Cineworld shares are up more than 41% in the year to date, but why have they dipped since March? What is the outlook for the rest of 2021 and beyond?
- Cineworld share price up 41.38% in the year to date
- Significant retraction from 122.00p March 2021 highs
- Year-end net debt of over £3bn
- Third Covid-19 wave could risk Cineworld's progress
- Ready to trade the Cineworld share price? Open an account today
Why is the Cineworld share price still displaying bearish tendencies?
Although investors in Cineworld shares will have enjoyed the 41.38% return so far this year, as of 11 June, the market sentiment remains uncertain towards the cinema giant.
Since reaching year highs of 122.00p in March 2021, the Cineworld share price has given back much of its gains, falling to 87.02p during early trading on 11 June.
Despite the increasing positivity about the full unlocking of the UK economy, Cineworld’s debt lingers like a millstone around its neck at present. Year-end net debt liabilities worth over £3bn are bad enough, but this increases further still to over £5.8bn when lease liabilities are factored in.
Even during its trading year of 2019 – before the Covid-19 pandemic struck – more than three-quarters (78%) of its operating profit was ring-fenced to service debt of over £400m. Cineworld was forced to increase its borrowing significantly throughout 2020, receiving over £700m in total. The sheer cost of servicing this debt alone approached £555m last year.
In total, Cineworld’s debt is approximately eight times its earnings before interest, tax, depreciation, and amortization (EBITDA) in the last year.
Is the threat of Covid-19 variants still weighing heavily on Cineworld shares?
The elephant in the room for Cineworld is the prospect of a third major Covid-19 wave across the UK. As the Indian variant spreads nationwide, the prospect of delays to fully unlocking Britain from Covid-19 restrictions becomes ever more likely.
Given its escalating debt situation, Cineworld can ill-afford another whole-scale shutdown of its operations. A return to the level of Covid-19 restrictions of pre-May 2021 would be catastrophic for Cineworld and the wider cinema industry. Despite this, Cineworld CEO, Mooky Greidinger, is hoping for a ‘good recovery in attendance in coming months’. All eyes will be firmly on Prime Minister Boris Johnson, who is due to make his decision on England’s ‘Independence Day’ unlocking, scheduled for 21 June.
What additional headwinds exist for Cineworld?
Although the current Cineworld share price represents plenty of upside against its all-time highs of 350p, with an overall 273% price rise over the last eight months, there are plenty of additional industry headwinds that could force Cineworld shares off course once more.
Aside from its balance sheet, and the delay in restoring its dividends to shareholders, Cineworld is also facing an uphill battle against the cultural decline of visiting the cinema. The company share price is still down by around 50% compared to 2019. Coupling the pandemic with the fact that box office figures have been in steady decline over the last two decades throughout the US, which remains Cineworld's biggest market, means analysts are understandably remaining wary.
Go long or short with the Cineworld share price today
Take your position on UK shares for just a small initial deposit with spread bets or CFDs. Spread bets are completely tax-free, while CFDs are free from stamp duty.1 You can also buy and take ownership of UK shares for just £3 with us.2
Open an account to start trading or investing in UK shares.
1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
2 Deal three times or more in the previous month to qualify for our best rate
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
You might be interested in…
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 spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.