Cineplex Stock Could Surge Once the 4th Wave Peaks

Cineplex (TSX:CGX) stock is still being plagued by the COVID-19 pandemic, but as restrictions ease, could the stock be slated to soar?

| More on:
movies, theatre, popcorn

Image source: Getty Images

Cineplex (TSX:CGX) stock has suffered quite a massive fall from grace. It’s been painful for those investors who held on all the way down, and while it’s tempting to throw in the towel after one of the worst years in the record books, I think it may actually be a great time to put on your contrarian hat.

It’s a long way up. With shares of the Canadian movie theatre and entertainment kingpin now off over 77% from its 2017 all-time high, a time I urged investors to sell, it seems like the battered and bruised stock will never recover to see the mid-$50 levels again, at least without a reverse split.

An aggressive reopening play on the TSX — and volatile as ever

The COVID-19 pandemic remains as uncertain as ever, with the horrific Delta variant causing outbreaks across the globe. And with Lambda and other variants of interest that could grow to become variants of concern, betting on the most aggressive of reopening plays like Cineplex still comes with a high magnitude of risk that’s far higher than most investors can handle.

There’s no shame in walking away from a soured investment if you can’t handle the volatility. Heck, Warren Buffett did so with airline stocks earlier last year. But for those with a diversified portfolio who can handle extreme levels of volatility (think double-digit moves as the “new normal”), I think it makes a tonne of sense to do some buying as Cineplex looks to start climbing off rock bottom.

The road ahead will not be easy, especially if more lockdowns loom. Although people are starting to shrug off the pandemic because they’ve been vaccinated, I do think it’s unwise to think that the pandemic isn’t capable of taking a drastic turn for the worst and that Cineplex is in the clear.

The road ahead hasn’t looked this bright in nearly two years

Things have slowly returned to semi-normal over these past few weeks as Canada wound down from its horrific third wave of COVID-19. Vaccination rates are rising by the day and the nation finds itself in an enviable spot as far as vaccination rates are concerned. Indeed, Canadians feel safer as they head back to activities that they used to enjoy before the pandemic. Many people have enjoyed games at the local Rec Room and films at the local Cineplex for the first time in a while. It’s the first taste of normalcy in over a year and a half. And this taste won’t go away anytime soon.

Moving forward, Cineplex has a path to much higher levels. But that doesn’t mean there won’t be another potentially disastrous pullback en route to higher highs. New films, including must-watch blockbuster hits like James Bond’s No Time to Die will draw in huge crowds if localities keep their doors open in what could be an imminent fourth wave of COVID-19.

Regardless of what happens next, there’s value for long-term investors to be had in Cineplex at these depths.

The recent movie slate has been quite modest, and straight-to-stream hits like Black Widow may have seen their box office numbers cannibalized by options to stream the film. In the era of COVID-19, muted box office results and sub-par movie slates are to be expected. But over the extremely long term, once the COVID-19 threat has faded,  Cineplex could benefit from pent-up demand for its very social form of entertainment, which, I believe, is irreplaceable.

So, if you’re committing to hold shares through volatility over the next three years, I think Cineplex stock is a buy.

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.

More on Investing

Piggy bank next to a financial report

TFSA: 2 Canadian Dividend Stocks for Your $6,500 Room Contribution

Alimentation Couche-Tard (TSX:ATD) and Scotiabank (TSX:BNS) are great value picks for new TFSA investors looking to put money to work.

Read more »

value for money

3 Remarkably Cheap TSX Stocks to Buy Right Now

Looking for some quality bargains on the TSX today? Check out these three stocks for value, growth, and income.

Read more »

money cash dividends

Passive Income: How to Make $600 Per Month Tax Free

Canadians on the hunt for passive income in a choppy market can look to generate $600/month with True North Commercial…

Read more »

Dividend Stocks

Better Buy for TFSA Passive Income: Telus Stock or TD Bank?

Telus stock and TD stock look cheap today. Is one really oversold?

Read more »

funds, money, nest egg
Dividend Stocks

Income Stocks: A Once-in-a-Decade Chance to Get Rich

As a part of your diversified investment portfolio, solid dividend stocks on sale can help you get rich with growing…

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

2 Superb TSX Stocks to Buy for Passive Income

All dividend stocks can help you start a passive-income stream, but relatively few offer a healthy combination of yield and…

Read more »

A golden egg in a nest
Dividend Stocks

TFSA Investors: 2 Growth Stocks to Build an Adequate Nest Egg

Two TSX growth stocks are ideal holdings for TFSA investors building a nest egg or retirement wealth.

Read more »

financial freedom sign
Dividend Stocks

How to Easily Make $1 Million in 20 Years

There's trying to time the market, and then there's the easy way of investing if you want to make $1…

Read more »