The Cineworld share price has been in a strong bearish trend as existential risks for the company remain. The CINE stock price has crashed by 35% this year and 74% in the past 12 months. Still, it has outperformed the AMC stock price, which has fallen by more than 47% this year. Other movie theatre stocks like Cinemark and Cineworld have dropped by over 20% this year.
Cineworld’s share price has been under intense pressure this year as investors remain concerned about the company’s future. This is because it has a mountain-load of debt due to the company’s action during the pandemic. In the most recent quarter, the firm said it has over $5 billion in debt. This is substantial considering that the firm has a market cap of below 200 million pounds.
Worse, the company is facing a major lawsuit from Cinemark, a Canadian company. In 2021, the company won $1 billion from a Canadian court. While Cineworld has appealed, it is unclear whether it will win the lawsuit. If it loses, there is a likelihood that the company will declare bankruptcy in the coming months.
Still, even if it wins the lawsuit, it will be difficult for the company to continue as a going concern due to its significant debt burden and the soaring interest rates. In the most recent quarters, the company’s net interest expenses have jumped from $483 million to $548 million to $828 million. This means that the firm is spending over 40% of its revenue paying a debt. And as rates rise, the company will continue spending more money on this.
The daily chart shows that the CINE share price has been in a strong bearish trend in the past few months. The shares managed to move below the important support level at 26.94p, the lowest level on March 4th. It remains below the 25-day and 50-day moving averages and the important support at 22.38p.
Therefore, the stock will likely continue falling as investors wait for the Cinemark lawsuit. If this happens, we can’t rule out a situation where it drops below 20p. However, a move above the resistance at 25p will invalidate the bearish view.
This post was last modified on %s = human-readable time difference 10:02