The Cineworld Group (LSE: CINE) share price has risen like the proverbial Phoenix from the Flames during the past six months. The successful development and then rollout of Covid-19 vaccines in the US and Britain has helped the UK leisure share gain more than 280% in value during the past six months.
That said, the appeal of Cineworld’s share price has lost some momentum in recent weeks. After touching its most expensive since February 2020, above 120p per share last month, the cinema chain has dunked back below the psychologically-critical 100p marker again.
This could be down to simple profit-taking following those heady gains of recent months. I think though, a recent surge in global Covid-19 infections could also be prompting UK share pickers to get jittery again. The question is, what direction will the Cineworld share price now head in?
Why Cineworld’s share price might soar again
As I said, there’s no question vaccine rollouts in Cineworld’s core American and UK markets have been a hit. It’s why the company has been making plans to fling open its doors to the public again in these territories.
Fans of Cineworld are hoping that moviegoers will be banging down the doors to get back into theatres. The popularity of cinema as a mass medium has endured over the past century, despite the creation of television, the internet and other technological diversions and leisure activities. Indeed, the global box office hit record highs of $42.5bn in 2019 before the pandemic hit.
It’s hoped demand for cinema tickets will be particularly strong after more than a year of Covid-19 lockdowns. Booking levels among some holiday operators like Saga have been extremely encouraging and illustrate how eager people are to get out and about again. Stronger-than-expected movie ticket sales for the same reason could help power Cineworld’s share price higher once again.
Careful now…
That said, I’m not tempted to buy the Cineworld share price. Firstly, global Covid-19 infection rates are rising rapidly again. This has the potential to blow the cinema operator’s reopening plans wildly off course. On top of this, the ongoing coronavirus crisis could mean audience numbers in its theatres will have to be severely limited, dealing a huge blow to hopes of a strong revenues comeback.
This is particularly worrying considering the huge amount of debt Cineworld is nursing. Net debt at the UK leisure share ballooned to a jaw-dropping $8.3bn as of the end of 2020. This was up $600m from a year earlier. And the business has continued to add to the pile in recent weeks. Earlier in April, it passed a resolution to suspend its borrowing limits to issue a $213m convertible bond.
Even if Cineworld avoids any more significant coronavirus-related problems, I worry about how the business will be able to get its debt pile down, given the spectacular rise of streaming services, not to mention the soaring problem of movie piracy. I still think the long-term outlook for the Cineworld share price remains fraught with danger.
