The Cineworld (LSE:CINE) share price has been battered over the course of the pandemic. As we entered 2020, Cineworld shares were trading comfortably above the 200p level. However, from March onwards the trend was firmly lower, with the share price at 62p as we go to print. Some may see this as an undervalued buying opportunity, but here are several reasons why we’d stay away.

The size of the debt pile

There is no getting around the sizeable amount of debt that Cineworld has at the moment. If we rewind slightly, additional debt was needed to ensure enough cash flow to get through the pandemic.

For most of 2020, cinema sites were closed, meaning that revenue dried up. Revenue fell from $4.3bn in 2019 to just $852m in 2020. When you add in the cash burn rate, it’s no surprise that the loss posted in 2020 was $2.65bn. As part of this, new bond issuance and drawing down on cash facilities was needed to keep the business going.

Although we are now coming out of the other side of the pandemic, at what cost has this been for Cineworld? Debt has passed the $8bn mark, which is disproportionally high when you consider the revenue figures mentioned above. The Cineworld share price could remain under pressure until this debt pile gets under control.

The rise of streaming

One argument for buying Cineworld shares right now is the line up of blockbusters due to be released before the end of the year. In fact, in the half-year update, Cineworld flagged 16 movies that could help to boost revenue. This is valid. However, the longer-term problem of the rise of streaming is going to be an issue.

For example, Disney’s blockbuster Jungle Cruise was concurrently shown on Disney+ as well as in cinemas. This is one option going forward, but will split revenues from the cinema operator. Other films have gone straight to streaming, with the likes of Netflix and Amazon Prime. When you add in the mix the in-house studios of the streaming providers that are now gaining more traction, the future of the traditional movie theater could be under pressure.

Further downward pressure on the Cineworld share price?

Finally, another downward pressure on Cineworld shares could be the unknown future with regards to the pandemic. Customer demand might not return to pre-pandemic levels, as people don’t want to be in the same enclosed space as other strangers. We might also see some form of restrictions imposed on people during the coming winter, hampering cinema operating hours.

Don’t get us wrong, the pandemic might be completely over. But the unknown future likely makes Cineworld shares too high risk to consider putting a meaningful investment into. Therefore, we’d stay clear and look to other high conviction ideas such as buying Airbnb shares.

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