Is the Cineworld share price too low ahead of results?

The Cineworld (LSE: CINE) share price has climbed 20% in 2022 so far. Today, I’m asking whether this momentum can be sustained into next month and beyond.

Recovery in revenue

I’m actually not expecting all that much in the way of surprises when it comes to Cineworld’s full-year numbers on 17 March. After all, only a few weeks have passed since the company last provided an update on trading. 

In January, the battered mid-cap said performance and attendances had “steadily grown” over the six months to the end of December. In July 2021, for example, total revenue was 50% of what it had been in 2019. By the last month of 2021, this percentage had improved to 88%. Much of this increase can be attributed to popular releases such as Spider-Man: No Way Home, No Time to Die and Black Widow.

What’s far more important however, is how the company has traded so far this year. 

Cineworld share price: going higher?

On a positive note, the gradual (now complete) removal of Covid-19 restrictions over recent months can only be a good thing. Throw in the half-term holidays (and inevitably shocking British weather) and I reckon trading over the last couple of months has probably been solid, albeit not spectacular.

The slate of upcoming movies is also promising. A positive reaction from critics and fans to the new Batman film, for example, could help lift the Cineworld share price in advance of results day. Later in the year, we can expect sequels such as Top Gun 2 and Jurassic Park: Dominion.

Perhaps most importantly, there’s also been speculation in recent weeks that Cineworld will negotiate a deal with Canadian rival Cineplex over the former’s aborted deal to buy the latter. Agreeing to lower damages would actually be in Cineplex’s best interests. This is because it would receive very little (if anything) in the event of the business going bust. Avoiding bankruptcy would probably do no harm to the Cineworld share price either.

Red flags

Of course, lots of very rational arguments against investing in Cineworld remain. These include the reduced window between movie release dates and the same films being made available on streaming platforms. In fact, the rise in the cost of living also makes a monthly subscription to the latter look even better value for money than a trip to the flicks. 

Even if a deal is done with Cineplex, I also have to ask myself whether I’d want to own a stake in a company with such a horrific balance sheet. To be frank, there are so many far more robust businesses to choose from in the UK market.

20% up, but…

While the recent momentum might be welcome for those already holding the stock, we need to keep things in perspective. The Cineworld share price is still down 60% in the last 12 months. In the last five years, the company’s value has tumbled 86%.

I don’t think this pessimism is unjustified. And while there are certainly reasons for thinking that the stock could continue rising in March and beyond, I’m still not inclined to get on board even if it does.

If that means me missing out on the mother of all recoveries, so be it. The potential returns aren’t worth the stress of the journey, in my opinion.