Will September be a good month for the Cineworld share price?

Sentiment has been moving firmly away from the Cineworld share price, even with businesses opening up. Is this a buying opportunity?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Earlier in 2021, the Cineworld (LSE: CINE) story looked like it was heading towards a happy ending. Lockdown measures were easing, and the company’s liquidity seemed enough to get it through. By March, the Cineworld share price had gained 90% from the start of the year.

But then things started to go wrong again, and the shares headed south. Since that March peak, we’ve seen a fall of 47%. Those big early gains have evaporated. Over the past two years, Cineworld shareholders are sitting on a 70% loss. And even prior to that, the price had already been weakening.

So what’s happening, what’s likely to happen next, and what should I do as an investor? Firstly, what might happen in one particular month won’t necessarily mean anything at all in the long term.

But I do wonder if maybe we’ve seen the Cineworld share price bottoming out. If we do see any improvement throughout September, I can’t help feeling it could be the start of something sustainable.

Changing investor sentiment

Why do I say that? I’m becoming increasingly convinced we’re seeing a change in the market’s approach to stocks affected by the pandemic. Before the crash, nothing was keeping investors away from long-term fundamental valuation. Then things turned upside down, and the focus shifted to what’s happening on a daily basis. Who’s likely to go bust? Which companies will get a boost? What’s the latest on vaccine developments?

Now we’re increasingly heading out of the crisis, I reckon heads are starting to cool again. And folks are going back to scrutinising those profit and loss accounts, and balance sheets, once more.

It reminds me of what economist and investor Benjamin Graham said, that in the short run, the market is like a voting machine, but in the long run, it’s is like a weighing machine. The voting based on all sorts of short-term events is fading, and the weighing machine is kicking back in again.

Cineworld share price valuation

How does Cineworld weigh up now then? First half results, for the period ending 30 June, were understandably bad. The closures of the early part of the year led to an adjusted EBITDA loss of $21.1m. I don’t think that’s actually too bad. But a cash burn rate of $45m per month is more troubling. As is a net borrowing figure that now exceeds $4.6bn.

Still, cash of $436m together with a fresh $200m loan raised in July will hopefully see the company through without a need for any major new funding. Cinemas are all fully open, though it might still take time for audiences to get back to pre-pandemic levels. So what’s my strategy now?

I’m going to watch how the share price goes in September and beyond. And I’ll wait until I think the weighing machine is back in proper balance before I consider buying. I suspect that won’t be until we see full-year results, at least.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

3 value shares for investors to consider buying in 2025

Some value shares blew the roof off during 2024, so here are three promising candidates for investors to consider next…

Read more »

Investing Articles

Can this takeover news give Aviva shares the boost we’ve been waiting for?

Aviva shares barely move as news of the agreed takeover of Direct Line emerges. Shareholders might not see it as…

Read more »

Investing Articles

2 cheap FTSE 250 growth shares to consider in 2025!

These FTSE 250 shares have excellent long-term investment potential, says Royston Wild. Here's why he thinks they might also be…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Has the 2024 Scottish Mortgage share price rise gone under the radar?

The Scottish Mortgage share price rise has meant a good year for the trust so far, but not as good…

Read more »

Investing Articles

Will the easyJet share price hit £10 in 2025?

easyJet has been trading well with rising earnings, which reflects in the elevated share price, but there may be more…

Read more »

Investing Articles

2 FTSE shares I won’t touch with a bargepole in 2025

The FTSE 100 and the FTSE 250 have some quality stocks. But there are others that Stephen Wright thinks he…

Read more »

Dividend Shares

How investing £15 a day could yield £3.4k in annual passive income

Jon Smith flags up how by accumulating regular modest amounts and investing in dividend shares, an investor can build passive…

Read more »

Investing Articles

Could this be the FTSE 100’s best bargain for 2025?

The FTSE 100 is full of cheap stocks but there’s one in particular that our writer believes has the potential…

Read more »