Cineworld Share Price Outlook as Divergence With AMC Widens

Summary:

In this Cineworld share price outlook, we explain what to expect now that the stock has deviated from that of AMC

The Cineworld share price is in a tight range even as AMC experiences one of the best parabolic rallies in modern history. CINE ended the day at 93p, about 13% above the lowest level on May 13. It is also more than 485% above the lowest level in 2020.

Cineworld and AMC Entertainment divergence

AMC and Cineworld are companies in the same industry. They all run thousands of movie theatre chains in North America and Europe. The two make money by selling movie tickets and additions like popcorns and beverages.

In 2020, the two companies moved close to bankruptcy as the coronavirus pandemic forced them to shut down their operations. In total, AMC lost more than $4 billion while Cineworld lost more than $2.65 billion. They also added billions of dollars in debt to cushion themselves from the cash burn.

Recently, though, AMC and Cineworld shares have deviated. On Wednesday, AMC stock price more than doubled, bringing its total market cap to more than $30 billion. This means that the shares have risen by more than 3,000% since February. AMC stock rose after the company announced new plans to create more engagement with retail investors who own most of the shares.

Cineworld shares, on the other hand, have gone nowhere in the past few days and are more than 25% below the year-to-date high. This is mostly because there have been no Wall Street Bets euphoria in the UK.

So, what next for Cineworld? Fundamentally, Cineworld is well-positioned to grow as the UK reopens and demand for movie theatres rise. This is evidenced by the fact that movie tickets have been selling out in key locations.

Cineworld share price forecast

The daily chart shows that the Cineworld share price has struggled lately. The shares have dropped by about 25% as the divergence with AMC widens. The stock is along the 25-day and 50-day exponential moving averages. It has also formed a descending channel that is shown in red. The price is along the upper side of this channel. It is also slightly below the upper side of this channel.

Therefore, in my view, there is a possibility that the stock will retreat as investors target the lower side of the channel at 82.40p. However, a move above the resistance at 100p will invalidate this prediction.