The Cineworld Group (LSE: CINE) share price has traded in a broad sideways motion over the past few months. It’s remained stable while other UK shares have plummeted on fears of a Chinese property crisis. But jitters surrounding the Covid-19 crisis and the prospect it might be forced to close its doors again have stopped the penny stock from breaking out.
I used to own Cineworld shares but I sold out last autumn during the then-height of the health crisis. I originally bought the leisure share because the conveyor belt of ticket-moving Hollywood blockbusters was speeding up with franchises that pushed the global box office to repeated record peaks before the pandemic struck. The onset of the pandemic forced me to revisit my bullish take, however, as Cineworld’s gigantic debt pile made me fear for its very existence as it closed its doors.
The cinema operator is clearly in better shape than it was in late 2020. Its cinemas are open again and it’s taken steps to bolster its balance sheet too. This is all reflected in Cineworld’s share price surge since then. There’s still a possibility that Cineworld could make UK share investors terrific returns from Tinseltown’s endless stream of sequels and reboots of popular movie franchises. Its expensive entry into the gigantic US market could still pay off in the long term.
But I’m afraid the stock still carries too much risk for my liking. The ongoing Covid-19 crisis still puts it in great danger regarding that mountain of debt. And its long-term future is in danger as the US streaming giants ramp up investment in programming and technology. Just today Netflix announced a deal that will see it make a raft of films and shows from the family-friendly Roald Dahl canon.
A better penny stock to buy
I’d much rather buy penny stock Ediston Property Investment Company (LSE: EPIC) over Cineworld right now. The outlook for many UK shares involved in retail is bleak as e-commerce batters the bricks-and-mortar segment. But I think retail park operator Ediston could actually thrive during the digital shopping revolution.
As the Local Data Company explains: “Demand for space on retail parks is increasing as brands search for larger spaces to fulfil online sales and facilitate click and collect services.” It expects vacancy rates for retail parks to decrease in the 12 to 18 months “as more deals are done by occupiers looking to invest in this type of asset” following the carnage caused to the sector by Covid-19.
Naturally a prolonged fight against the coronavirus could hit retail park tenants and consequently profits at Ediston. But I’d still buy it because I think its long-term outlook remains extremely bright. The penny stock’s shopping parks account for more than 70% of its total property portfolio. And pleasingly the business plans to focus future investment in retail warehouse spaces.