Cineplex (TSX:CGX) is a Canada-based entertainment organization that operates the nation’s biggest multiplex theatre chain. At last count, Cineplex operated 164 locations, controlling 1,687 screens across the country. For investors, Cineplex stock is the easiest way to gain exposure to the Canadian movie scene.
Of course, this sector is one that’s been under pressure for years. Prior to the pandemic, attendance numbers were dropping. Accordingly, Cineplex was forced to raise ticket prices to offset these losses. Coming out of the pandemic, much of these headwinds are still in place, with folks less likely to want to sit in a crammed theater for three hours.
However, there remains a strong reopening thesis with this stock. So, who’s right? Can Cineplex stock grow its way out of this situation? Let’s dive in.
Cineplex slashes quarterly loss
On a positive note, progress is being made from a financial standpoint.
Cineplex recently reported its full-year 2021 results, which were much better than 2020 (the onset of the pandemic). The company noted that revenues for Q4 grew 472% year over year to $300 million.
These Q4 results provided roughly half the theatre chain’s traffic for 2021, with more than 10 million customers showing up to see movies. This included a periodic shutdown of some theatres in late December. All in all, it was a good showing.
Notably, the company’s loss narrowed to $249 million from $624 million a year prior. Cineplex is moving in the right direction, albeit with a lot of work to do. However, if we ever learn to live with this virus, there’s certainly an argument that can be made that Cineplex stock could be one with much better financials in short order.
Big push: Higher-priced options
Another key driver bulls on Cineplex stock tout is the increased availability of higher-priced options. As the company looks to combat at-home entertainment, focusing on premium experiences for guests has become a priority. Accordingly, Cineplex and its peers have had to grind harder to earn more cash from every patron.
Cineplex’s AVX and VIP lounges continue to provide an interesting growth thesis. Should theatres return to normal (for good this time), these segments could become key profit centres. Additionally, Cineplex has other lines of business that are intriguing. How these are leveraged remains to be seen. However, there are levers that can certainly be pulled.
Bottom line
Overall, I think the outlook for Cineplex is a difficult one. This theatre company is one that is likely to see headwinds moving forward. Thinking that it will be smooth sailing ahead for Cineplex is likely naïve.
That said, Cineplex stock certainly makes for an intriguing risk/reward scenario at these levels. Thus, long-term investors may want to give this stock a speculative look right now.
