The Cineworld Group (LSE: CINE) share price is slumping once again. The penny stock’s down 6% during the past week alone, taking losses over a 12-month period to 60%.
In a recent chilling note analysts at Hargreaves Lansdown said that “the horror story continues for Cineworld with little sign that there will be a rapid recovery in its fortunes, and so its share price is bumping along in the cheap seats.” Susannah Streeter noted that blockbuster releases like James Bond outing No Time to Die and SpiderMan: No Way Home have helped bookings at the business of late. But she added that “spies and superheroes alone won’t be the secret weapon back to health.”
Why Cineworld’s share price could keep sinking
I won’t buy Cineworld because of the huge amount of debt has hanging around its neck. It’s a problem that’s set to grow by another several hundred million dollars too following a court ruling concerning its failed acquisition of Canada’s Cineplex. I also worry about how changes to the way movies are released in favour of streaming services like Netflix will damage box office sales.
It isn’t out of the question that cinema ticket sales will continue their recent rapid ascent. But all things considered I think Cineworld still presents too much risk to me as a share investor. I think the share price could continue to slide.
2 better penny stocks to buy
This isn’t something that keeps me up at night, though. There are, after all, plenty of other low-cost UK shares available for me to buy today. Here are just two penny stocks I think are great buys for me following recent price weakness.
SIG
Building materials supplier SIG just fell to its cheapest for almost a year as investors fretted over its operations in Eastern Europe. Its share price is now just 7% higher than it was 12 months ago. I’d use this as an opportunity to buy the company’s shares (it now trades on a rock-bottom forward price-to-earnings growth — or PEG — ratio of 0.2).
I expect demand for SIG’s products to rise steadily as construction activity in Europe heats up. I also reckon sales of the penny stock’s insulation materials could soar as the drive to save energy picks up. I’d buy it even though sales in Poland could suffer as a result of the ongoing Ukraine crisis.
The Works
Retailer The Works has slipped more than 7% in value in just a week as concerns over crushed consumer spending power have risen. Inflationary pressure has the potential to push costs up at the business too. But I think the benefits of owning The Works could outweigh the risks. I think demand for its cheaper games, craft items, books and toys could rise as shoppers try to stretch their shopping budgets as far as they can.
I also think the steps The Works is taking to boost its online operation could pay off handsomely as e-commerce grows. Sales via the value retailer’s website leapt 72% in the 11 weeks to 16 January, latest financials showed. Today this penny stock trades on a forward price-to-earnings (P/E) ratio of just 7 times.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
