Cineworld (LSE: CINE) got off to a good start this week. On Monday, we saw a climb of 12%. And a bit extra in early Tuesday trading pushed the Cineworld share price to a 15% spike. The shares are still down 65% over two years, mind.
We appear to be enjoying what people are calling a James Bond bounce. The 25th film in the venerable series is due to hit the screens on Thursday. Odeon (part of AMC Entertainment Holdings) is already predicting the biggest opening for two years. That’s not much of a shout, mind, seeing as cinemas have been pretty much at a standstill for that long. But it’s all good for the headlines.
The movie had originally been planned for April 2020, but repeated pandemic delays have put it back until now. I welcome this progress for a couple of reasons. One is that I love the cinema (even if I’m not a Bond fan and won’t be going to this one). The other is that it’s good news for shareholders and for the Cineworld share price.
But I have to ask, does one specific film really make all that much difference? The simple answer, I think, is no. But it’s about more than that. I suspect a lot of investors were holding back until something like this happened for good reasons.
Recovery rule #1
One is a rule of thumb I follow when considering recovery situations. I try to avoid buying into a recovery until I see it starting to take root. Buying for a potential recovery before I see convincing evidence that it’s happening is too risky for me. I know, shares will already be back on the way up by the time I have the evidence I need. So I won’t bag the biggest possible gains. But against that, I reckon I’m reducing my chances of buying into a flop.
Investors have also been afraid that the pandemic closures could mark one more step toward the ultimate demise of the cinema business. We’ve already seen the shortening of the window between cinema release and online streaming during the crisis. That makes it a bit easier to sit at home and wait for films to come to you, and lowers the desirability of pulling your boots on and heading out into the cold.
But demand for the new Bond film does appear to be very strong, and that surely softens investors’ fears. Does it mean cinema audiences will bounce back as strong as ever? I’m not so sure of that.
Cineworld share price future
There will be a few more blockbusters coming to cinemas in the new few months. And I expect we’ll see what looks like a healthy recovery in the industry. I also reckon there’s a very good chance the Cineworld share price will end the year nicely ahead of where it is today.
So will I buy? No. Cineworld might now pass my ‘wait for the recovery’ rule. But it’s still a long way from my ‘don’t buy a company with massive debt’ rule. There are many good companies with strong balance sheets out there, and I just don’t need to take the risk.