Short sellers love Cineworld stock! Will it ever be a lucrative investment?

first_img John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Kirsteen owns shares of Amazon. The Motley Fool UK owns shares of and has recommended Amazon, Netflix, and Walt Disney and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. “This Stock Could Be Like Buying Amazon in 1997” Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Our 6 ‘Best Buys Now’ Shares Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Image source: DCM An industry facing significant headwindsThe cinema industry faces many headwinds. The rise of the streaming networks, from Disney+ to Netflix and Amazon Prime, has led to cinema quality TV on demand at home. This gives consumers a wide viewing choice in the safe comfort and convenience of home, and it’s cheaper than going to the cinema.Meanwhile, the pandemic has taken nearly a year of revenues away from Cineworld. In 2019 it enjoyed revenues of $4.37bn which fell to £852m in 2020. When footfall resumes, it’s likely to be at a reduced capacity. Overheads will stay the same, but revenues are not likely to return to pre-pandemic levels for a very long time.Add to this the massive debt Cineworld has had to raise. It’s escalating above £6bn and that money has to be paid back, which further reduces the profit-making potential for the group.An uncertain futureOverall, I’m impressed at how the company has navigated the choppy waters of the pandemic. It’s clearly doing all it can to stay solvent, and it may well succeed. But at this point I think a lot will depend on luck and the psychology of the public. Will we want to rush back to cinemas, or will other entertainment options be more appealing?Also, Covid-19 is still with us and rampaging through some parts of the world. Of course the rise of lateral flow Covid-19 testing may offer a way to allow more people to attend the cinema, or perhaps Cineworld will come up with another novel way to generate revenue. For instance, during the pandemic in South Korea, a cinema chain generated income by hiring its screens to gamers.Unfortunately, when it comes to the future of Cineworld, I still feel I’m in the dark. Therefore, I don’t feel confident buying Cineworld stock today. Short sellers love Cineworld stock! Will it ever be a lucrative investment? Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. FTSE 250 stock Cineworld (LSE:CINE) has been high on the list of most heavily shorted stocks for the past two years. When a stock is ‘shorted’ it means hedge funds and other institutional players see weakness in the stock and are betting its share price will sink. Therefore, when a company is heavily shorted, it pays for investors to be wary.Cineworld’s volatile share priceCineworld became a significant short seller target long before the pandemic hit. That’s because with admission rates falling, hedge funds were witnessing a drop in revenues and profit. And therefore, this raised the likelihood of a share price crash.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The Cineworld share price has fluctuated heavily in recent years for this reason. When short interest increases, so does speculation. So, rather than a safe long-term investment, it becomes a stock with which day traders love to gamble.After enjoying an upward trajectory from 2012 to 2017, the Cineworld share price began its extremely volatile period. Two years ago, it was trading above £3 a share, but it had collapsed below 20p by the March 2020 market crash. The volatility continued throughout 2020 and today it sits around 96p. Kirsteen Mackay | Tuesday, 4th May, 2021 | More on: CINE Simply click below to discover how you can take advantage of this. See all posts by Kirsteen Mackaylast_img read more