It just keeps getting worse for cinemas. After a torrid year, seeing forced closures under government lockdown restrictions, movie theatres have limped on. There was little to be positive about, to be sure, but there was a glimmer of hope that restrictions would ease and that new films would suck customers back in. The Cineworld (LSE: CINE) share price has been particularly hard-hit during the Covid crisis, dropping from 220p at the start of 2020 to just 27p at the time of writing on Monday.
That slide is likely to continue today too. It seems that Cineworld is looking to close all of its cinemas across the UK and Ireland — temporarily for now. That means all 128 of them. This is obviously a disaster for Cineworld. Its business model is totally reliant on customers paying for tickets and snacks and refreshments. There’s no digital option for it. To make even matters worse, the company is looking to close all of its 536 US cinemas too.
Why are they closing?
Cinemas across the country had been eagerly awaiting the latest releases – and one film stood out above the rest. The latest James Bond movie – No Time To Die – was due to be released in November. It has already been delayed, having been previously planned for a spring 2020 release. Cineworld was confident that a release of this calibre – with the cultural significance that Bond has in the UK – would breathe new life into the business.
As you’ve probably guessed, those hopes have been dashed. The release of No Time To Die has been delayed again, until an unannounced date in spring 2021. In response, Cineworld is drawing up plans to close cinemas until such a time when new films like the next Fast & Furious will finally be released. It’s highly likely that the share price will be majorly impacted by this news when the market opens this morning.
What next for the Cineworld share price?
For me, there’s plenty of reason to be concerned for the company’s future. It’s not just Covid that’s crushing the share price. Streaming services like Disney+ are landing heavy blows on the cinema industry. Streamers are releasing their new films directly on their services, taking away the once exclusive monopoly that cinemas once enjoyed. Another kick in the teeth for Cineworld is that it had until recently been on an acquisition spree, loading up with debt to become one of the largest cinema chains in the world. Now all these cinemas have to close. But the debt can’t be closed with them. That debt is staying.
Cineworld had already announced losses of £1.3bn in the first half of 2020. What next? It doesn’t look pretty. So, when you see the Cineworld share price going further and further down, that might be because the outlook keeps getting bleaker and bleaker. A search for more financing is quite likely.
However, if the company can ever get back to its previous revenue (a big ‘if’, with the trend towards streaming well established) then perhaps it would have been a good idea to get in when things were looking at their worst. That said, it’s hard to find an industry that has been hit harder and one for which the future looks as tough as it does for cinemas.
The post What next for the Cineworld share price? appeared first on The Motley Fool UK.
Toby Aston has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020