Has the ITV Share Price Bottomed Yet?

Investors don't appear to be happy with the private British broadcaster's investment plans, so when can they expect to see some ROI, if ever?

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The latest developments

ITV's share price hasn't been able to capitalize on the pandemic recovery. This is particularly concerning, given last year more people stayed home because of the pandemic. A series of internal problems have plagued the company.

The major concern for investors is the move to streaming. The stock price tumbled after its March 3rd earnings as it reported plans to invest £180M over the next couple of years to set up a new streaming platform. The decision is the right one but it will cripple near-term profitability and there’s a huge question over whether the investment will pay off.

Getting things in order

CEO Carolyn McCall has set the target of £750M in revenue from digital platforms by 2026. That is laudable but the reality is that ITV is struggling against increasing digital competition.

ITV had record revenues last year and delivered strong financial results in March too. But it appears that many think television will be taking a backseat in the future, particularly in the crucial younger demographic. With less than a quarter of revenues coming from digital, and in half a decade since those services were launched, it can give the impression that the company has focused too much on its legacy TV platform. The latest investment changes that, but has arguably come too late.

How to turn things around

The market has likely already priced in the cost of the digitalization problems. Now the question is whether ITV can deliver. It won't be for several months before a change in subscription numbers could be appreciated. Meanwhile, the firm is making unusual small deals, such as a media-for-equity contract with carwow, which did little to reassure investors.

It is unlikely investors will get better insight into the digital division before May's trading update. The stock price could remain under pressure until there is some concrete evidence that ITVX can hold its own in an increasingly competitive environment.

ITV shares: dead cat bounce

The ITV share price plummeted 28% on March 3rd and continued to slide down to 70p where it formed a local low on March 7. A short-covering rally has since ensued, helping shares up 30% off lows, begging the question whether the bottom is already in.

The latest sell-off in the 5+ year downtrend took place after a failure to break below a down-sloping trendline connecting the most recent major peaks going back to 2018. There is some consolation to the fact that the lows at 50p have not been taken out but the trend remains down.

For any real hope that that a major bottom is in place, bulls would need to rally over this downtrend line and above the 2022 high around 125p.

Source: Spreadex trading platform

Key takeaways

Many investors have dropped ITV shares due to its plan to go digital. Competition is fierce, and the company could take a while to see its last move giving back.

If there is a bullish case, it is that the company has finally recognised the need to focus more on digital. It is not clear if the company will succeed but the best investment opportunities are always before it is clear that success will come!

The next big event is the May trading update.