I’m searching for what I think are the best penny stocks for UK investors. And following heavy share price weakness I believe Everyman Media Group (LSE:EMAN) shares could be too cheap to miss.
Here’s why I’m looking to open a position in the company myself when I have spare cash to invest.
Box office bombs
Buying shares in cinema operators is riskier today than in years gone by. The problems of Cineworld — which was finally brought down by disappointing post-pandemic ticket sales — illustrate the challenge that cinemas have in attracting viewers through their doors.
A steady stream of sequels, reboots and spin-offs of Hollywood blockbusters drove the global box office to record highs before Covid-19. But signs are emerging that these cash cows aren’t the force that they once were.
DC Comics superhero movie The Flash generated poor ticket sales on its release last month. Even Harrison Ford vehicle Indiana Jones and the Dial of Destiny — a titanic Tinseltown franchise and rock-solid banker in previous times — delivered awful box office numbers when it opened at the weekend.
This could be a sign of any one (or even a combination) of several things: the impact of the cost-of-living crisis on ticket sales; intense competition from streaming companies like Netflix and Amazon; even public dissatisfaction with a Hollywood movie system bereft of new ideas.
A premium selection
Whatever the reason(s), this poses a problem for cinema chain Everyman Media Group (LSE:EMAN). However, I still believe this penny stock could prove a brilliant investment right now.
Films are at the heart of what it does. But Everyman’s 38 venues are about more than just catching a flick. Moviegoers can grab a drink at one of its bars or a bite at its restaurants before or after taking their seat.
It therefore provides viewers the chance to have a proper night out without even leaving its premises. This gives it an advantage over mainstream cinema operators who are struggling to pull people off the sofa and away from streaming services.
Everyman also puts on other films and events to get bums on seats. Independent films, special editions of Hollywood favourites, throwback movies, and theatre and music events are all part of its packed roster.
The company’s focus on the premium end of the market gives it an extra advantage too. This makes it is less vulnerable to economic downturns than bog-standard cinema operators like Cineworld are.
Building for growth
Everyman’s strong trading in 2022 illustrates the effectiveness of its business model.
Helped by the end of Covid-19 lockdowns, admission numbers soared to 3.4m last year from 2m in 2021. On top of this, higher ticket prices and increased spending on food and drink per head helped it swing back into profit as revenues soared.
Encouragingly, last year’s stellar result has prompted Everyman to restart its ambitious expansion strategy. This in turn could lay the foundation for robust long-term profits growth. It plans to open six new venues in 2023 and says that it has an “exciting pipeline of further opportunities” beyond this year as well.
