Stock of the day 04/03/2016 – Cineworld Group PLC

Will Cineworld feel the force with a Star Wars-boosted set of full year figures next Thursday?

Back in August things were looking pretty fantastic for Cineworld as it revealed an impressive set of half year results; sales soared 22.6% to £268.2 million, whilst pre-tax profit grew by a whopping 67%, form £13.9 million to £46.8 million year-on-year. Of course as any regular cinema-goer knows these figures were in part aided by the ever rising price of tickets, Cineworld’s average increasing 7.9% to £6.02. Investors flocked to the stock after these results, sending Cineworld 8% higher in the immediate aftermath with the company eventually hitting a fresh all-time high of £6.10 by the end of August.

A decline across September was then quickly recovered in October, Cineworld once more tickling the £6 mark by the end of the month. Yet the stock soon suffered its worst drop in 5 years, falling nearly 7.5% as Canaccord Genuity claimed the company hadn’t capitalised on the blockbuster-boom in the same way as its rivals Odeon and Vue, giving the stock a sell rating as it lambasted Cineworld’s failure to raise ticket prices or maximise its screen time.


(Source: IT-Finance.com 04/03/2016)

This effectively wiped away the gains the company had made following its half year results, and by the end of November Cineworld was trading at near 3-month lows of £5.17. The record-breaking success of Star Wars: The Force Awakens towards the end of the year did, however, help the stock recover some of its losses, closing out 2015 at £5.64.

Yet things soon became worrisome once again as 2016 got underway; dipping to £5.40 in the first week and a half of the year Cineworld’s sell-off accelerated in the middle of January as it updated investors on its full year performance. Whilst revenues rose 12.3% thanks to the runaway successes of Star Wars, the final Hunger Games film and the latest Bond flick Spectre, the company’s claim that profits would be ‘in line with current market expectations’ disappointing those investors hoping for a blockbuster-boosted set of earnings.

That statement, alongside the general 2016 turbulence, sent Cineworld to a 7 month low of £4.55 by the first week of February, only for the recent market-wide recovery to see the stock lift back to £5.39 by the start of March. However, the first week of March ended with Cineworld once again being dragged down by a ‘Sell’ rating, this time from UBS, leaving the stock at a current trading price of £5.08 (IT-Finance.com, 04/03/2016).

Cineworld Group PLC has a consensus rating of ‘Buy’ with an average target price of £6.04.