CJ CGV Takes a Break Again Amid COVID-19 Resurgence

Last Week's Rapidly Recovering Stock Price
Currently Trading Down 2.4% Intraday
Demand Expected to Explode When Ended

[Asia Economy Reporter Oh Ju-yeon] CJ CGV's stock price, which briefly rose on news of Moderna's clinical trials for the novel coronavirus (COVID-19) vaccine, lost momentum over the weekend as concerns about COVID-19 resurfaced. However, there are expectations that the stock price will quickly recover along with pent-up demand once the COVID-19 pandemic enters its end phase.

According to the Korea Exchange on the 25th, CJ CGV's stock price rose 10.4% from 21,100 KRW to 23,300 KRW during the week of the 15th to the 21st, significantly outperforming the KOSPI's 3.7% increase. This was due to growing hopes for a return to normal life following the vaccine clinical trial news. However, renewed concerns about the resurgence of COVID-19 caused the stock price to fall 4.7% from the 22nd until the morning of the 25th, giving back some of the gains. As of 10:10 AM on the same day, CJ CGV was trading at 22,150 KRW, down 2.42% from the previous trading day. Analysts predict that the company will continue to post losses in the second quarter following an earnings shock in the first quarter.

CJ CGV reported sales of 240 billion KRW in the first quarter, a 48% decrease compared to the same period last year, and an operating loss of 71.6 billion KRW, marking the largest loss in its history. The stock price halved from the early January level of around 34,000 KRW to about 14,000 KRW by the end of March. Although it rebounded to around 26,000 KRW, an approximately 80% increase, the stock price has fluctuated repeatedly whenever COVID-19 issues have resurfaced.

Yuanta Securities forecasts that CJ CGV will record a large-scale loss in the second quarter. In South Korea, 35 directly operated stores were closed starting March 28 and only resumed operations on April 29. Overseas, theaters in China, Turkey, Vietnam, and Indonesia were also gradually closed, significantly reducing operating days. Some analyses suggest that the operating loss in the second quarter could reach the 60 billion KRW range.

Since COVID-19 is in the process of ending, there is also anticipation that if theaters normalize before the peak season in July, demand will increase explosively. Kim Hoe-jae, a researcher at Daishin Securities, said, "Although CJ CGV was hit hard by COVID-19, its poor performance was not structural. Because the release of major domestic and international films was delayed until the second half of the year, pent-up demand will continue until the first half of next year, and the annual number of moviegoers next year is expected to increase by 20% compared to the previous year, recovering to around 220 million."