As one of the rebound stocks that has become popular among investors playing the vaccine trade, Cineplex Inc. (TSX:CGX) has more than doubled from the trough the company saw earlier in 2020. That said, I think this stock doesn’t have much in the way of catalysts to take it much higher in the near-term. In fact, I think the odds are now stacked against this company in a way they haven’t been in the past.
Cineplex has restructured some of the debt it had owing in the near-term, pushing these obligations out to next year. That said, the company’s current ratio still doesn’t look great, and Cineplex is likely to need a liquidity injection which could take the form of either more debt to make its short-term payments, or issue shares, both of which would be detrimental to this company’s stock price.
Cineplex’s financial shape isn’t as dire as it was a few months ago, but there is a reason this stock hasn’t rallied further unlike other similar companies out there right now.
The real issue I have with Cineplex right now is the long-term prospects for this company don’t look great. I don’t see the masses suddenly choosing to do a dinner and a movie anytime soon.
On a personal level, movie theatres are not a place I’ve gone to frequently for many years, for a number of non-pandemic related reasons. The shift to streaming platforms we’ve seen, the attendance declines we’ve seen, and the relatively thin margins that previously existed for Cineplex are all bearish for this stock. I think these trends may accelerate over time, furthering the idea that this is not a stock to own, but to watch.
Invest wisely, my friends.
