Cineworld Share Price has Collapsed. Is it a Buying Opportunity?

Summary:
• Cineworld share price has come under intense pressure in the past few months as concerns about the company’s future continued.

Cineworld share price has come under intense pressure in the past few months as concerns about the company’s future continued. In September, the CINE share price crashed to a low of 1.78p, which was its lowest level on record. It means that the company’s share price has collapsed by more than 92% this year, becoming one of the worst performers in the FTSE 250.

Cineplex to merge with Regal?

Cineworld has come under scrutiny as the company navigates the long and winding bankruptcy process. The company received some reprieve last month when it gained access to about $750 million in liquidity. Still, most analysts believe that these funds will not get it out of the deep hole it finds itself in since it has over $5 billion in debt.

In a statement on Friday, Cineworld said that its business will continue struggling in the next few years since the box office industry is recovering at a much slower pace. The firm’s revenue rose to $1.6 billion in the first six months of the year whole its operating profit rose to  $57.3 million. In its report, the firm said that it expected that the volume of theatrical releases in 2023 and 2024 will be tight. 

Meanwhile, in the United States, Cineplex made a case for merging with Cineplex, the biggest theatre chain in Canada. The firm, which has filed a $1 billion case against Cineworld, has started talks with Cineworld’s lenders about taking over Regal Cinemas. Cineworld acquired Regal Entertainment in a $3.6 billion deal in 2017. Still, it is not clear whether Cineworld will be comfortable selling Regal.

Cineworld share price outlook

The daily chart shows that the CINE share price has been in a strong bearish trend in the past few months. As a result, the stock crashed below all moving averages. The MACD has formed a bullish divergence pattern while the pair has formed what looks like a double-bottom pattern.

In all, the outlook for the stock is still bearish now that it is unclear how it will emerge from bankruptcy. Nonetheless, increased volatility cannot be ruled out. In the recent past, we have seen asset prices of bankrupt companies like Revlon and Voyager Digital surge.