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Shares of Cineworld Group plc (LON: CINE) surged 27.7% today despite the lack of major releases from the cinema operator driven by investor optimism about the reopening of theatres once a vaccine is commercially available.
News that Moderna’s COVID-19 vaccine was 94.5% effective in preventing the coronavirus triggered a massive pike in Cineworld shares as the likelihood of cinemas reopening soon increased significantly.
Today’s news provided resh impetus to Cineworld’s stock given that its latest rally was boosted by news that from Pfizer and BioNTech that their coronavirus vaccine was over 90% effective in preventing the disease that has ground the whole world to a halt.
The stock’s positive momentum is also drawn from investor expectations of back-to-back movie releases once theatres resume normal operations, which could see cinema chains such as Cineworld pull in high revenues as moviegoers flock back to cinemas.
It is also becoming clear to most investors and industry experts that popular streaming services such as Netflix cannot replace theatres entirely given that its almost impossible for such services to replicate the movie theatre experience.
Cinema operators had seen their share prices fall amid worries that the growing popularity of movie streaming services would make their business model obsolete. However, many have now realised that consumers still prefer the movie-theatre experience, especially for blockbuster film releases.
However, Cineworld still has a huge debt load of about 48 billion and is in talks with creditors to restructure the debt. Investors should be aware of this fact before investing in the stock.*
*This is not investment advice.
Cineworld share price
Cineworld shares today surged 27.7% to trade at 56p having rallied from Friday’s closing price of 43.84.
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