JPMorgan downgrades Cineworld, slashes price target
By Michele Maatouk
Date: Monday 30 Mar 2020
(Sharecast News) - JPMorgan Cazenove downgraded shares of Cineworld to 'neutral' from 'overweight' on Monday and slashed the price target to 90p from 300p after the company shut the doors to its cinemas due to the coronavirus outbreak.
"This has heaped further pressure on a share price already impacted by concerns around financial leverage and structural threats from streaming," it said.
The bank said Cineworld would have sufficient liquidity to survive the total closure of its estate for the rest of the first half, provided it cancels both dividends and growth capex and adopts various mitigation strategies to reduce costs, including significant curtailment of lease payments and wages.
"We think Cineworld would be likely to exceed the 5.5x covenant on its revolving credit facility after a little more than two months of closure, although it may be possible for a waiver to be arranged," it said.
The bank said it cannot envisage "a realistic scenario" in which the acquisition of Cineplex can take place during the first half.
"The complete lack of visibility on the duration of cinema closures and the high level of gearing mean we cannot recommend investors buy the stock at present and we downgrade to neutral," it said.
At 0955 BST, the shares were down 15% at 45.44p.
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