Cineplex has had a turbulent few years, as the company faced financial difficulties stemming from the pandemic and the subsequent Cineworld Group plc acquisition that never came to fruition. Looking for a long-term investment? Look no further than the big screens.
Look no further than the big screen for long-term gains
Cineplex Inc. (TSX—CGX)
Cineplex has suffered in recent years. The COVID-19 pandemic forced it to close its theaters, of course. On December 15, 2019, Cineworld Group plc agreed to acquire Cineplex. Cineworld later backed out of the agreement. Cineplex sued and won a judgment of C$1.27 billion. Cineworld has since then filed for bankruptcy and likely lacks the funds to pay Cineplex.
On the positive side, Cineplex is on the mend. In 2022, it lost some dollars on its shares. Following this trend of downturn, this year, you can anticipate the shares to drop mildly too. However, if you buckle up and fast forward to 2024, Cineplex price per shares should see positives in dollars.
While one can expect good things for Cineplex, it would be a disservice to not consider its debt. It carries a debt of $1.848 billion and its net debt is $1.806 billion. You might relate that this figure is far above the standard comfort zone.
Another sticky situation with Cineplex is that it pays no dividends. Given the stretched state of its balance sheet, it’s unlikely that the company will pay dividends any time soon. If you need dividends, buy dividend payers because otherwise you’d be watering the wrong plant.
Cineplex remains a Buy for long-term share price gains. But only if you don’t need any dividends.
This is an edited version of an article that was originally published for subscribers in the December 2022/First Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.
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The MoneyLetter •4/13/23 •