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Cineworld theatre

Shares of British cinema operator Cineworld Group plc  (LON: CINE) surged 7.65% higher as investors reacted to the impressive revenues generated by Godzilla vs Kong at the Box Office over the weekend.

The company’s Regal US theatres reopened on April 2 to show the Godzilla vs Kong movie after the massive coronavirus lockdown measures. Investors were surprised to see the movie gross over $45 million during the weekend despite being available for streaming on HBO Max.

Cinema experts were impressed to see that moviegoers still preferred to watch the movie on the big screens at movie theatres instead of streaming the movie from the comfort of their homes.

Investors have a reason to be optimistic given that Cineworld shares are back above the 100p level. Still, many analysts are concerned that the company is overvalued, given that its shares are up over 163% in the past year.

Cineworld shares have surged over 300% over the past six months despite its theatres being closed due to the coronavirus restrictions. However, the company is optimistic that its theatres can operate profitably despite their reduced capacity due to social distancing measures.

Many investors are concerned about Cineworld’s $8 billion debt pile, making it one of the most indebted companies. Servicing its debts will weigh on the company over the next few years and negatively impact its share price.

Luckily the cinema operator has secured adequate capital to fund its operations over the short term as it implements a phased reopening plan in the US and the UK, its two main markets.

Risk-averse investors may be best served finding other attractive stocks will less leverage, given that the company admits that there are doubts as to whether it will keep operating as a going concern in future.

Cineworld share price.

IG chart of Cineworld share price 06-04-2021

Cineworld shares rally 7.65% to trade at 106.98p, having risen from its last closing price of 99.37p.

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