Cineplex Stock: Buy, Sell, or Hold?

Cineplex (TSX:CGX) stock has been quite the laggard, but the long-term story could improve with time.

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Shares of movie theatre firm Cineplex (TSX:CGX) have been under so much pressure for years now. Those who dared chase the stock amid its multi-year slump may have little (if anything) to show for their patience. At around $8 and change per share, it certainly seems like CGX stock is dead money right here, with a lack of meaningful catalysts to help propel shares out of their funk.

Year to date, the stock is pretty much flat, with shares up around 3%. Indeed, the year-to-date performance may be flat, but the ride has been rather choppy, with shares fluctuating wildly in both directions, peaking north of $10 per share, only to plunge back to the single digits. Indeed, it’s frustrating to be a holder of Cineplex stock as the movie theatre industry continues going head to head against the video streamers.

The pandemic lockdown days may be over, but competition with streaming remains as fierce as ever, with tech firms getting a piece of the action. Though there will always be a place for cinemas, the business has become challenging. And Cineplex will need to continue trimming away at expenses while beckoning in customers, even during those Hollywood droughts.

Oppenheimer shows that movie theatres are not over amid streaming’s continued rise!

Indeed, Barbenheimer weekend (the weekend that saw two blockbuster films Barbie and Oppenheimer, launch) is a glimmer of hope for the movie theatre industry. Clearly, people are more than willing to get off the couch and forego Netflix (NASDAQ:NFLX) for an evening if there’s something that’s a must-watch in theatres.

Understandably, it’s just not realistic to have Barbenheimer weekends every second week or even every month. As Hollywood moves on from strikes, I think the pace of must-see theatrical releases will pick up again. But Cineplex shareholders ought to be patient, as quarterly results are sure to be lump.

The big question is: will there be more Barbenheimer-like weekends in the distant future?

I’d bet on it, as more streamers opt to go theatrical release first before streaming on their platforms. Cinemas can co-exist with streamers. And over the next couple of years, I think the tables will begin to turn back in favour of the theatre firms.

Indeed, the streaming market has matured a great deal in recent years. And consumers probably seek more reasons to go out and see a movie. As more streamers opt for theatrical releases first, expect industry dynamics to improve for Cineplex. Whether that means more Barbenheimer-like weekends, however, remains to be seen.

The bottom line on Cineplex stock: It’s a hold

In the meantime, Cineplex stock remains a tough hold, in my humble opinion, given the hazy medium-term trajectory and a potential Canadian recession that might just be waiting around the corner.

Though I wouldn’t go as far as to call CGX stock some kind of value trap, I think value hunters need to be thinking many years out if they seek impressive results, as Cineplex’s multi-year flatline is likely to continue in 2024 and perhaps 2025.

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 and Netflix. The Motley Fool has a disclosure policy.

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