Should You Buy Cineplex (TSX:CGX) Stock Ahead of an Economic Reopening?

Cineplex (TSX:CGX) stock hasn’t looked this good in quite some time, but with the stock up 200% since October, is the name still worth buying?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With the pandemic likely to end over the next 16 months, Cineplex (TSX:CGX) stock definitely seems like a no-brainer buy that could enrich you over a very concise timeframe. However, with shares up currently up over 200% from their October lows — a time I’d urged contrarian, deep-value investors to get in before the herd recognized the severe undervaluation — it’s important to weigh the potential rewards with the risks you’ll bear.

Now that Cineplex investors are piling in Cineplex stock ahead of a (sustained) economic reopening, I’d argue that the stock may no longer be worth buying, given the slate of risks that still exist.

Cineplex stock has risen considerably. So too have the stakes

The price of admission has more than tripled since my early November buy recommendation, urging investors to buy at $5 and change. Many things can still go wrong, and one must not discount the business erosion suffered by the Canadian movie theatre kingpin. Moreover, I’d imagine that many speculators are guilty of playing “acquisition roulette” once again. If this pandemic unexpectedly takes a turn for the worst (mutated variants of concern are still spreading), investors could lose their shirts in a hurry. As such, Cineplex seems more like a stock with an options-like risk/reward with shares trading at around $14 and change.

Things are looking up for Cineplex, but the movie theatre giant isn’t out of the woods yet

Shares of Cineplex recently surged on the back of news of a private placement notes offering of $250 million. Undoubtedly, yield-seeking investors are more willing to up their risk profiles in this ridiculously low-rate environment. Such bond sales could help Cineplex navigate through the later stages of this horrific pandemic, but one must not discount the risks that could cause the stock’s recent bout of momentum to reverse course.

Cineplex has taken drastic steps to improve upon its solvency position. And if the vaccine rollout continues smoothly, Cineplex stock could easily have a multitude of upside left in the tank. On the flip side, there’s not much room for error. The world is in a race with the rapidly mutating coronavirus. Right now, it seems like COVID-19 is about to be conquered, with the recently accelerated vaccine timeline and firms like Pfizer that are already hard at work to stay a step or two ahead of the insidious virus.

Still, the initial vaccine rollout could hit a bump between now and summer, when everybody who wants a vaccine will have their first shot in the arm. Furthermore, the end of the pandemic doesn’t mean the end of COVID-19. Some experts believe the virus could plague the world for years after the pandemic ends. And its longer-term implications on the movie theatre industry in a post-pandemic environment remain unknown.

Foolish takeaway

Time is vital for Cineplex right now. Although recent offerings improve its chances of making it through another few quarters of this crisis, any unforeseen lengthening of this pandemic and its associated restrictions could spell trouble for Cineplex investors. In any case, I wouldn’t look to chase the stock after its incredible run. The stock is way too hot and seems to be discounting any potential hiccups, which, as you may know, should always be considered in the valuation process.

With another brutal quarter right ahead, patient investors may have a better entry point up ahead. Just make sure you’re aware of the downside risks.

Should you invest $1,000 in Cineplex right now?

Before you buy stock in Cineplex, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Cineplex wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends CINEPLEX INC.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Stocks for Beginners

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

Senior uses a laptop computer
Energy Stocks

Here’s How Investors Can Turn $15,000 in a TFSA Into $235,000

Energy stocks aren't created equal, and this one might be one of the best of the batch.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Map of Canada showing connectivity
Tech Stocks

1 Magnificent Canadian Stock Down 16% to Buy and Hold Forever

This Canadian stock might be one of the best opportunities out there right now while shares are down.

Read more »

Woman in private jet airplane
Stocks for Beginners

2 Canadian Value Stocks I’d Add to My Portfolio While They’re Still Cheap

Canadian stocks nose-dived and recovered in a matter of a week. Despite the recovery, the sentiment is bearish, making way…

Read more »

Happy shoppers look at a cellphone.
Stocks for Beginners

Top Canadian Stocks to Buy Immediately With $1,000

Want some oversold, Canadian stocks with a bright future? Then check out these!

Read more »

Person slides down a stair handrail
Dividend Stocks

Should You Buy Cargojet Stock at $70?

Cargojet stock might be down, but don't let that scare you off. It's still a long-term opportunity.

Read more »