Sept. 14, 2020
Here is the article.
Why this year and next are so important for Cineplex
Cineplex owns and operates movie theatres across Canada. Its shares have dropped 70% in 2020. However, the stock has climbed 10% over the past month.
Back in August, I’d discussed whether theatre re-openings could propel the stock in the second half of 2020. On August 20, Cineplex announced that all 164 theatres and 10 entertainment venues would open across Canada. However, it will still operate under limited capacity due to COVID-19 restrictions.
In previous articles, I’d discussed the challenges facing Cineplex. The pandemic has thrust even more consumers into the arms of home entertainment providers like Netflix. However, Cineplex CEO Jacob Ellis has continued to strike and optimistic tone. Disney stirred controversy with its decision to release Mulan exclusively on its Disney+ platform.
Ellis argues that theatres are still “the engine that drives the train . . . it’s trading dimes for nickels when you go directly to streaming, because you don’t have that $40 million worth of revenue from theatrical releases around the world.”
Despite his confidence, Disney will also be forced to respond to consumer behaviour. If this leans away from movie theatres, Cineplex will be in more trouble in the years ahead. Shares of Cineplex last had a P/B value of 1.7. It was forced to withdraw its monthly dividend earlier this year.
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