The Cineworld (LSE:CINE) share price is up 138% over the past year to trade at 67p. This might seem an impressive statistic, but I need to remember that only two years ago the share price was comfortably above 200p. In the short term, we did see a spike just above 80p at the end of September, the highest level since July. So could we have another run at that level again this month?
A boost from Bond
The spike in the Cineworld share price last month can be largely attributed to the release of the new James Bond movie No Time To Die. It’s arguably the first major blockbuster movie to be shown in cinemas since the start of the pandemic.
As of the end of last week, the film had grossed $313m globally at the box office. It has eclipsed the other major movie release, Venom, which also contributed $185m globally since release.
The bottom line here is that revenue is finally flowing through the box office at Cineworld venues around the world. Not all of the above figure would go to Cineworld, of course, as many other operators are in the market. But a decent chunk would have done, given the size of the business in the US and globally.
The earlier price spike was seen before these numbers came in, but the fact that the movie was finally being released (with the expectation of a good performance) was enough to improve investor sentiment and lift the Cineworld share price.
A short-lived spike to 80p
Yet I think it was very telling that the bump from the new Bond movie hasn’t lasted. The Cineworld share price has dropped back to levels seen earlier in September. This leads me to conclude that investors don’t expect it to materially change the long-term value of the company.
There are a few reasons to support this view, in my opinion. Firstly, the half-year results showed a monthly cash burn of $45m. Logically, it’s going to take more than a couple of big movie releases to sustainably generate cash flow that can offset such a burn rate.
Secondly, net debt was at $4.6bn, largely due to the impact of the pandemic. Again, this is going to be a long-term issue to resolve. It’s not something one or two movie releases will be able to solve.
My thoughts on the Cineworld share price
With the above thoughts, I don’t see the share price reaching 80p again this month. I think it’ll take longer before the move higher can happen. I do anticipate buying shares at some point in the future, but not right now. Rather, I want to see signs from the management team of a clear strategy to reduce the debt level and shut down loss-making venues to become a more efficient business.
I’d also want to wait until a Q4 trading update to fully see how much of a boost James Bond has actually provided. If he’s meaningfully lifted the outlook for the company, with an updated pipeline of films for 2022 that could do similar numbers, then I’d be interested in buying some shares.
jonathansmith1 and The Motley Fool UK have 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.
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