Business & Investment

Why Cineplex Stocks Become High Volatility Trading

Pandemics are not friendly to the film industry and are subject to strict social distance restrictions. This delays the release of some movies. According to PWC, the global media and entertainment industry saw a 65.9% year-on-year decrease in box office revenue in 2020. However, with the deployment of vaccines and the opening of theaters with limited capacity, the world is slowly recovering. Cineplex Co., Ltd. (TSX: CGX) Inventory may be something to watch out for.

Cineplex shares fell a total of 60% from their peak, but rose 13% in the third week of February 2021. I think this volatility translates directly into the fact that Cineplex currently has a lot of momentum.

So here’s my view on why this stock is showing such a trend and whether it’s too risky to invest right now.

More film delays may be catastrophic

Cineplex reported in its fourth-quarter earnings call that attendance was only 786K. This reduced revenues during this period by 88%. He also had to spend about $ 24.8 million a month in the quarter and sell his headquarters in December to generate cash and pay off his debt.

Its EBITDA margin is currently a 44% loss and total outstanding debt is approximately $ 1.79 billion.

To be honest, I don’t think these numbers are shocking. The theater will be the last place to open at full capacity, even with a full-scale vaccine deployment. However, larger release delays can be devastating to the stock of a company that relies heavily on walking traffic to generate revenue.

Blowout Bond Trading May Be Silver Lining

Cineplex enjoyed strong demand from investors wanting to engage in economic recovery trade and sold Unrated bonds Worth $ 250 million at a lower yield. The deal will take place after COVID-19 vaccination campaigns have grown around the world, leading investors to position them for a post-pandemic resumption.

Given that Canada lags behind other Western countries in terms of vaccination, I think this is a bold move. However, this could be the liquidity improvement needed to close the gap between current and post-recovery.

Conclusion

The Toronto-based multiplex chain currently has a market capitalization of $ 766 million. From a market function perspective, blowout fixed income trading shows that even companies directly affected by COVID have access to capital.

However, those who are betting on Cineplex stocks can expect higher or lower volatility levels. Therefore, it is difficult to predict in which direction this strain will go. Therefore, I think conservative long-term investors should avoid this stock for now and wait for a parabolic trend.

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Stupid contributor Chris Macdonald There are no positions in any of the listed stocks. Motley Fool recommends CINEPLE XINC.

Why Cineplex Stocks Become High Volatility Trading

https://www.fool.ca/2021/03/07/why-cineplex-stock-will-be-a-high-volatility-trade/ Why Cineplex Stocks Become High Volatility Trading

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