Peel Hunt reiterated its ‘hold’ recommendation on Cineworld on Tuesday as it cut the price target to 75p from 85p, noting that the share price has fallen but is not yet in “buy territory”.
The broker said it was cutting its forecasts “but as a catch-up not a downgrade”, as it has not updated forecasts since the FY20 results.
Peel reduced its FY21E EBITDA forecast from $975m to $510m now that it has slightly greater visibility on the year ahead.
“Cineworld’s share price has drifted off since the highs of March, when it reached 120p, more sharply recently,” it said. “As discussed in our note today, if we had stuck to the 7x recovered EBITDA valuation we used previously, we would have increased our target price to 90p and rated Cineworld a buy.
“However, tweaking the 7x to only 6.7x lets us set our new target price at close to the current price which, intuitively given the scale of the risks, appears to us to be the right recommendation.”
At 1420 BST, the shares were down 6.2% at 68.94p.
As reasons for the share price slump, traders also pointed to the fact that Walt Disney said the new Black Widow film was almost as popular on Disney+ as at the cinema. They also highlighted the UK government’s recommendation that people should continue to wear face masks in crowded indoor spaces even after 19 July.
