It’s been a rough month in the life of the Cineworld (LSE: CINE) share price. Since striking its highest level since February 2020 late last month, above 122p, it’s collapsed as risk appetite has waned. It was last trading a good 30p lower from those multi-month peaks and still sliding.
I myself haven’t been tempted to jump on the Cineworld bandwagon in recent months. The company’s enormous debt pile, and the long-term threat posed by streaming services, hasn’t encouraged me to invest despite the company making plans to reopen its theatres again.
Is the Netflix train slowing?
However, fresh trading numbers from Netflix (NASDAQ: NFLX) have suggested that the streamers might not be as invincible as some suggest. The US streaming giant signed up 4m subscribers in the first three months of 2021. This missed expectations of 6m by a distance and plummeted from the 8.5m it reported in the prior quarter. What’s more, Netflix reckons it will only add another 1m customers in the current quarter.
Time will tell whether Netflix’s slowdown simply reflects some normalisation after last year’s lockdown-related subscription boom, or whether we are now seeing the beginning of a demand decline as the world opens back up again. It certainly provides a crumb of comfort to Cineworld investors who feared that the soaring popularity of Netflix and its peers — exacerbated by movie studios cosying up them by changing the way movies are released — would have significant long-term ramifications for its business.
That said, it’s far too early to say that Cineworld investors can begin to breathe easy. As analyst Sophie Lund-Yates of Hargreaves Lansdown notes: “Netflix isn’t going anywhere… streamed content is the new normal”. The threat of the streamers remains considerable, then. And I believe this, allied with the threat of a third wave of Covid-19 infections, makes this UK leisure share still too risky for my liking. I’m not tempted to go dip buying after Cineworld’s recent share price fall.
4 UK shares I’d buy instead of Cineworld
Indeed, there are plenty of other so-called reopening stocks I’d rather buy for my Stocks and Shares ISA today. I’d much rather buy shares in Hollywood Bowl or Ten Entertainment Group for example. The popularity of ten pin bowling in Britain has swelled in recent years. And strong trading at these leisure operators in between recent Covid-19 lockdowns suggest that the market can resume its rocketing growth in the near future. Remember though that, like Cineworld, a fresh spike in virus cases could cause the businesses to shutter their operations again.
I’d also prefer to invest in Ryanair and Wizz Air than Cineworld right now. These two low-cost airlines have the financial muscle to weather a prolonged grounding of their planes as Covid-19 persists. And unlike the cinema industry, customer demand in the budget carrier segment is expected to grow and grow. Be aware that a recent rise in oil prices could hamper any profits recovery at these two reopening shares, however.