Fear a ‘dead cat bounce’? I’d avoid this dirt-cheap FTSE 250 stock

first_img See all posts by Paul Summers Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. “This Stock Could Be Like Buying Amazon in 1997” A ‘dead cat bounce’ can be defined as a temporary recovery in share prices before another swift bout of heavy selling takes place. Whether that’s what we’re seeing in the markets right now is, of course, anyone’s guess.Should markets quickly give up the positive momentum seen over the last couple of days, however, there’s one stock I definitely won’t be interested in buying, regardless of how cheap it becomes.  5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Off-screen dramaSince a trip to the movies involves sitting for hours in an enclosed space with popcorn-munching strangers, it’s no surprise the share price of cinema operator Cineworld (LSE: CINE) has been hit hard following the coronavirus outbreak. Yesterday, the stock closed at 140p — roughly 20% less than a month ago.It’s certainly possible things could get worse before they get better. A decision by the UK government to restrict ‘public gatherings’ in the event of a huge rise in those testing positive would be extremely negative for the company. Closing cinemas would surely be required, as it was in China.  Even if it doesn’t come to this, the ongoing disruption to the cinematic calendar is likely to impact earnings in the short term. Yesterday, it was announced the release date for the new James Bond film (No Time to Die) has now been put back from April to November. A couple of weeks ago, filming of the latest Mission Impossible installment was brought to an abrupt halt in Italy.Temporary or otherwise, I’d still be reluctant to snap up Cineworld’s shares for another three reasons.Loaded with debtFirst, the amount of debt the company now carries as a result of its decision to buy US operator Regal and Canadian business Cineplex remains significantly more than the current value of Cineworld itself! Bar a few exceptions, I’m not a fan of debt-laden companies at the best of times, let alone when markets are this fragile. Second, the popularity of streaming services, such as Netflix and Amazon Prime, shows no signs of falling (and is likely to soar if we’re all forced into self-isolation).  The arrival of Disney’s ‘Plus’ offering later this month will mean yet more competition for consumers’ eyeballs. Monthly subscriptions costing far less than a single trip to the cinema and offering a huge variety of content leave the FTSE 250 company looking very vulnerable, at least in my opinion.Third — and arguably as a result everything mentioned so far — Cineworld continues to attract significant attention from short sellers (those who bet on a company’s share price falling). Right now, it’s the third most shorted stock on the London Stock Exchange, according to shorttracker.co.uk.Highly-researched short sellers aren’t always right, but anyone owning stocks they target must be very sure of their reasons for staying positive. Worth a punt?Full-year numbers from Cineworld are expected on 12 March. Since these will relate to trading in 2019 only, it’s inevitable investors will be more focused on comments from management regarding the company’s outlook, in light of the coronavirus crisis.At a little less than six times forecast earnings, you might argue a lot of negativity is already priced in. With everything so up in the air, however, I think Cineworld looks a classic value trap. Image source: Getty Images. Simply click below to discover how you can take advantage of this. Paul Summers | Thursday, 5th March, 2020 | More on: CINE Paul Summers 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.center_img Fear a ‘dead cat bounce’? I’d avoid this dirt-cheap FTSE 250 stock Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Enter Your Email Address Our 6 ‘Best Buys Now’ Shares I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.last_img

Leave a Reply

Your email address will not be published. Required fields are marked *