Cineworld Group plc (LON: CINE) share price has fallen 21.7% in October but is currently trading at a significant support level. Can the shares reverse course and rally higher?
The cinema chain’s shares have been falling after Disney postponed the release of long-awaited potential blockbuster movies from popular franchises such as Indiana Jones, Black Panther and Thor amid production issues.
The cinema operators whose revenues recently got a boost from the latest James Bond movie, No Time To Die, is looking at a significant drought of new movie releases that could bring back moviegoers to their cinemas.
Furthermore, the rising COVID-19 cases in the UK could lead to stricter measures to combat the spread of the new delta variant, which could see the government over the closure of cinemas once again.
Cineworld shares had rallied higher since October 2020 after getting a reprieve from its lenders, who allowed it to restructure some of its debt obligations but left it dealing with debts worth a staggering $8.4 billion at the end of June 2021.
The closure of cinemas in its key markets, the UK and the US would leave the company without a revenue source, making it almost impossible to repay its massive debt pile.
However, COVID-19 infection rates in the US had been falling for a while, which means that the likelihood of closing its movie theatres there is relatively minimal at the moment. Still, the situation could rapidly change if the new delta variant starts spreading in the country.
Cineworld also faces an existential threat from streaming services such as Netflix that allow consumers to watch blockbuster movies and television series from the comfort of their homes.
Movie production companies have also recently started offering streaming services where consumers can stream their blockbuster movies, posing a significant threat to Cineworld, which relies heavily on showing such movies.
Long-term investors may be best served to stay away from Cineworld shares, given the company’s multiple fundamental threats.
However, short-term traders may look to profit from a move higher if the current 60p support level holds. Otherwise, we could get further decline if the price breaks below the long-term support at 56p.
*This is not investment advice.
Cineworld share price.
Cineworld shares are down 21.7% in the past month but are trading at support. Can they reverse course?
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