In March, Cineworld share price underperformed the FTSE 100 and FTSE 250 indices after the company reported a bigger loss than expected. The stock also retreated after the Cineplex legal drama continued. It ended the month at 32.62p, about 30% below its highest level this year. This performance was completely opposite of what AMC did as its share price bounced back.
Cineworld is fighting multiple battles at the same time. First, Cineplex, a Canadian movie chain, is seeking $900 million in compensation after Cineworld abandoned its offer. The court is still ongoing, and there is uncertainty about how it will end. If the firm losses its appeal, the next stage will be to file for bankruptcy since the company does not have that kind of money. It has a market cap of just 446 million pounds.
Cineworld is also fighting the battle of the huge debt accumulated before and during the pandemic. As you recall, the firm spent billions acquiring Regal Cinemas before the pandemic started. And when it started, it transitioned from being a movie theatre operator to a cash incinerator. As a result, it has almost $5 billion in debt and a narrow path to profitability.
Also, Cineworld needs to convince investors that it is a viable business that will continue operating as a going concern. One solution is to re-list its Regal business in the US and hope that it will become a fan favourite like AMC. So, is Cineworld a good turnaround story? The company is in a hole, and it is significantly difficult to be optimistic at this stage.
The CINE stock price has been in a strong bearish trend in the past few months. This period has shed over 74% of its value as investors focus on the mountain of challenges facing the firm. The stock has remained stubbornly below the 25-day and 50-day moving averages during all this time. The stock will remain in a bearish trend until there are enough bulls to push it above the two MAs. The next key level to watch will be at 25p.
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