Is Cineplex Stock a Buy Ahead of Summer Blockbusters?

Cineplex (TSX:CGX) stock has been in the doghouse for quite a while, but summer blockbusters could help the firm regain some ground.

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When it comes to exciting growth stocks, it’s easy to lose track of valuation, as you follow the momentum and the herd. Many investors learned the hard way that chasing stocks is a dangerous game. And it’s these lessons that should stick — not only in 2023 but for the decades to come. The market moves on greed and fear over shorter-term timespans. Excessive amounts of greed can be met with punishment, as too can fear if investors subscribe to conventional wisdom at any given moment.

Cineplex (TSX:CGX) stock is a cinema superstar that’s been under fire for so many years now. If you’re a new investor, it’s hard to remember the good ‘ol days, when Cineplex stock offered the perfect mix of capital appreciation and a juicy dividend. The pandemic hit Cineplex where it hurt. But it wasn’t the sole cause of the company’s pains. The rise of streaming and other industry factors has been a thorn in the side of many movie theatre companies.

Cineplex stock and the road to recovery

Believe it or not, Cineplex actually handled the powerful industry headwinds quite well — at least better than some cinema firms that have faced bankruptcy. It’s a hard industry to thrive in these days. That said, there is hope. And I think Cineplex may be closer to some sort of “inflection point” than any point in the recent past.

People will always go to the movies. If you’re getting a bit tired of streaming your favourite flick at home, you’re not alone. Streaming has begun to lose a bit of its lustre of late. Just look at how the video streamers and media firms have performed over the past year or so!

Though Cineplex has had an easier time getting bums in seats now that the masks are off and COVID-19 restrictions have faded away, there’s still one key issue that’s holding a name like Cineplex back from enjoying a glorious recovery, or, at the very least, some sort of sustained move higher: a relative lack of must-see hits in the post-lockdown period.

The strong movie slate won’t cool anytime soon

The movie slate may have been thin immediately after 2020 lockdowns. However, things are starting to pick up. And going into year’s end, there’s reason to believe that Cineplex can begin to fight back against streamers.

The coming movie lineup looks really good. And though it may be a wiser financial decision to wait until a new film lands on a streaming service, I’d argue that CineClub users, who can realize substantial savings for frequent moviegoers, are getting an impeccable value for a night out!

Going to a film will always be pricier than waiting for something to show up on a streaming service. That said, with must-see films that people can’t wait to watch, I view Cineplex as a firm that may not be in for as much pain as many think, as the Canadian economy weakens.

Simply put, the lineup for 2023 has been quite stacked. Christopher Nolan’s Oppenheimer and the new Fast X film could help keep the recent box office momentum strong.

Bottom line

At 0.65 times sales, Cineplex may be a great value right here. However, new investors should be patient with the name, as the movies could continue to be a tough place to thrive in.

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. The Motley Fool has a disclosure policy.

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