Is Cineplex Stock Worth Buying in February 2023?

Is Cineplex stock worth buying? That’s a question many investors still ponder. Let’s try to answer that question.

| More on:

Is Cineplex stock (TSX:CGX) worth buying in February 2023? That’s the question on investors’ minds, particularly as Canada’s largest entertainment company posted its first post-pandemic profit this week.

Let’s try to answer that question and see if Cineplex is finally moving out of pandemic-induced discount territory.

First, more on those results

Cineplex just announced results for the fourth fiscal earlier today. In that most recent quarter, the entertainment titan recorded a $10.2 million profit. This was a noted improvement over the $21.8 million loss reported in the same period last year.

On a per-share basis, Cineplex posted a $0.16 per diluted share profit for the quarter. A much-improved revenue number, which hit $350.1 million in the quarter, was the primary driver behind that bump.  In the same period last year, revenue came in at $299.9 million.

Theatre attendance for the quarter was 9.2 million, which lagged the 10.2 million patrons in the prior year. Fortunately, revenue per patron and concession revenue per patron contributed to that jump with some record-breaking numbers.

Specifically, box office revenue per patron saw a $0.77 increase to 13.06, while box concession revenue saw a $1.44 per patron increase.

Unfortunately, the same long-term problems still plague Cineplex

The promising results may look as if Cineplex stock is worth buying, but there are other considerations to take into account.

Specifically, Cineplex is still plagued by the ongoing shift towards streaming services. Streamers can offer entire libraries of content that can be streamed to a growing number of devices from anywhere.

During the pandemic, the appeal of streaming services only increased. In fact, some streamers have dedicated billions towards producing original content for those services.

In terms of cost, monthly unlimited access to streaming libraries costs less than a single movie admission. By comparison, the cost of going to a movie and buying concessions is on the rise, like everything else.

The other issue that Cineplex is forced to deal with is the quality of content that comes out of Hollywood. It’s no coincidence that Cineplex saw a bump in earnings when the highly anticipated Top Gun: Maverick hit theatres last year. The same could be said for Avatar: The Way of Water, which is still breaking box-office records around the world.

But what happens when that run of good, eagerly awaited films dries up? And will that impact make Cineplex stock worth buying?

That fear, along with the growing threat of streamers, is a big part of why Cineplex is diversifying itself. The company is looking to shift its over-reliance on the movie-and-popcorn business, which hasn’t changed much in a century.

Some of those initiatives include in-theatre solutions to attract patrons with an enhanced experience. Other options include different revenue streams, such as the company’s successful digital media business and the growing network of Rec Room entertainment sites.

Is Cineplex Stock worth buying right now?

No stock is without risk, and when it comes to Cineplex, the company is full of risk. The recently announced earnings report represents a welcome sign of recovery for the company, but it still has plenty of room to go.

If anything, diversifying away from the movie-and-popcorn business is where Cineplex needs to get to. Unfortunately, that’s a long-term initiative and may be outside the timeframe of most investors.

As of the time of writing, Cineplex is still trading down over 30% in the trailing 12-month period.

And unlike the Cineplex of the pre-pandemic years, the company no longer offers a dividend to keep investors invested in seeing that change through.

In my opinion, there are still far better options to consider right now. Many of those other options still offer a dividend and trade at a huge discount right now.

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 Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool recommends Cineplex. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

Asset Management
Stocks for Beginners

TFSA: 4 Canadian Stocks to Buy and Hold Forever

Thinking about what to buy with the new TFSA contribution space in 2025? These four Canadian stocks are worth holding…

Read more »

concept of real estate evaluation
Stocks for Beginners

2 No-Brainer Real Estate Stocks to Buy Right Now for Less Than $1,000

These two real estate sector-focused stocks have the potential to deliver strong returns on your investments in the coming years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

stocks climbing green bull market
Stocks for Beginners

3 TSX Stocks Soaring Higher With No Signs of Slowing

Don't ignore stocks just because they look like they're at a high price. Instead, see exactly why they've driven so…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »