It’s been more than a year since I went to a Cineworld (LSE:CINE) cinema. Today saw preliminary full-year results released by the FTSE 250 firm. I wasn’t expecting much but I was surprised to see the Cineworld share price lose nearly 10% today so far, as I write. Is there an opportunity here for the VERY long term?
Cineworld share price woes
I could buy shares in Cineworld for 181p per share in mid-February 2020. By the end of March, shares were trading for a paltry 36p per share. This is a mammoth 80% drop.
Since that low point, the Cineworld share price has fluctuated with restrictions easing over the summer and then going back into lockdown. The news of Covid-19 vaccinations signalled a potential lifeline for the beleaguered FTSE 250 firm too. Less than two weeks ago, shares were trading for 122p per share but it seems recent preliminary results have hit the share price hard once more.
Preliminary results
Cineworld has been forced to close it sites from mid-March last year. Naturally, results and performance will reflect this, but I think they are worse than first anticipated.
Revenue fell by over 80% to just over $850m. A mammoth loss of £3bn for 2020 will have played a part in the Cineworld share price falling sharply today. In 2019 it reported a pre-tax profit of over $210m. The FTSE 250 firm did attempt to reduce costs and preserve cash, however. Despite these measures, it was forced to seek funding to keep the lights on. It brought in over $800m in additional liquidity. Furthermore, it today announced an additional $231m from investors to see it through 2021.
To provide a snapshot of just how much the last 12 months or so has affected Cineworld, it reported that there were just over 50m ticket admissions over this results period. The previous year, there were 275m.
A FTSE contrarian investment or one to avoid?
The Cineworld share price has been battered and bruised over the past 12 months. But with its sharp decline today, I’m trying to think about post-Covid-19 life and trading for CINE and whether I could pick up a great reopening contrarian buy.
I do believe Cineworld will experience pent up demand. Many people are itching to enjoy the silver screen experience once more. In addition to this, there are lots of blockbuster movies that have been delayed and will come out once normality resumes so there could be a surge in performance at that time. Furthermore, Cineworld reported theatrical industry in other parts of the world has performed well since reopening. These include China, Japan, and Australia.
Overall, I am not confident enough in the Cineworld share price or its overall investment viability right now. I do acknowledge its dip today was slightly more than expected, which presents a potential opportunity. Cinemas may also have a battle on their hands to regain customers from streaming giants who have gained so much more traction in the pandemic period.
I don’t view Cineworld as a FTSE contrarian buy. In fact, if I am looking to invest in something a bit different, here is one stock I prefer and think will benefit from reopening.
