Highlights:
- Cineworld share price will show little growth over the next 12 months.
- I want to see Cineworld turn a profit and reduce net debt.
- Next 6 months turnover will be a good indicator as to how they’re performing in current economic climate.
- Consumer confidence needs to return to see the Cineworld share price improve significantly.
A closer look at Cineworld Group PLC
Cineworld shares have been on a steady decline over the last 12 months and are currently at an all time low.
The impact of covid is clear to see from their 5 year chart and they’re struggling to recover from the forced closures in 2020.
One of my main issues with Cineworld is their frighteningly high level of net debt which increased significantly in 2018, before anyone even new what a furlough scheme was. It jumped from £376m in 2017 to an eye watering £3.7b in 2018. The debt continued to grow and now, ignited by Covid, stands at £8.8b with fixed assets of just £4.5b. For a company that also made a loss of £566m in 2021, that is a lot of debt to be carrying. Far too much to consider it a safe investment at the moment.
The share price is currently sat at 23.11 with a market cap of £328m.
Peg ratio looks good at 6.2.
But the key to a Cineworld recovery will be filling cinemas up to pre-covid levels ASAP. The cinema business relies on bums on seats, but it also relies on good products, which is somewhat out of their control.
What have cinema goers got to look forward to?
We’ve just had Downton Abbey which you’d expect to do well but perhaps appeals to a limited audience.
Top Gun hit Cineworld in May which will have done well.
We’ve had a new Jurassic Park and Minions film which will have drawn good audiences. In the coming months there’s a Spider Man and a new Avatar as well as Indiana Jones, Fast and the Furious, Marvel, Mission Impossible and Guardians of the Galaxy within the next 12 months.
It certainly seems as though there’re enough movies to entice people in.
My other main consideration when determining a Cineworld share price forecast is the ticket costs themselves. I think Cineworld are one of the more reasonably priced cinemas with a family of 4 ticket costing £27.96 and a single at £10.99 (Src).
But we all know that the cost of going to the cinema doesn’t stop at the ticket price. If you’ve got a family of 4 heading to see Minions, you could easily expect to double the ticket price in drinks, sweets, arcade games and more.
Disposable income is very tight at the moment and consumer confidence is at an all time low. People will be thinking long and hard about how they spend any surplus cash they have and I wonder if cinema going will fall down the list of options.
Cineworld share price forecast
I can’t see Cineworld climbing above 30.00 anytime over the next 12 months and I think the September half year earnings release will offer caution, scaring investors off. There’re some reasonably good upcoming movies to get people in but the question is, can people afford it at the moment?
For Cineworld to push above 30.00 and beyond, we need consumer confidence to return, some solid movie releases and a return to profit. Importantly, Cineworld also need to be pay off £2b – £3b of debt so they’re not a bankruptcy risk. Worth taking another look at early 2024.
