Is Cineplex Doomed?

There are some businesses out there today that aren’t going to survive the coronavirus pandemic, that’s just a fact. The longer the pandemic goes on and the longer that large groups are not permitted to assemble, the more disastrous of an impact that it will have on businesses that need high traffic levels to survive.

One stock that may be in the worst shape is Cineplex Inc (TSX:CGX). As if online streaming wasn’t enough of a threat to its business model, now there’s an even bigger wrench throw into the mix: the company shutting down its theatres.

On Mar. 16, the company announced that it would be closing its theaters until Apr. 2, at least. And this month, the company confirmed that they will remain closed indefinitely. It could be months before the company can open them up again.

There’s unfortunately no timeline that it can offer investors because it doesn’t know itself. And that’s a significant problem. In the past four quarters, only once has the company’s profit margin been over 5% and it’s also been in the red during that time as well. It’s been surviving up until now, but that could change this year.

Shares of Cineplex are down a mammoth 68% in 2020. It’s unfortunately a waiting game at this point and there’s really no reason to invest in Cineplex today. It would be nothing short of a gamble. Even if the coronavirus pandemic ends in a month or two, people may not rush out to resume their day-to-day activities immediately.

People will still need to get back to work and get their lives in order. In some cases, they’ll have to find new jobs. The economy’s headed for some tough times ahead and unless Cineplex gets some significant help from the government, this is not a stock I’d expect will be able to survive this pandemic.

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