Stock of the day 25/02/2016 – ITV PLC

Often overlooked in favour of its more ambitious sector(ish) peers Sky and BT, can ITV draw a big audience with its full year figures next Wednesday?

Like many a stock in 2015, ITV had risen to fresh all-time highs at the start of August, crossing the £2.80 mark for the first time in its history. Of course we all know what happened as that month got underway, and in the aftermath of Black Monday the stock was sporadically dipping below £2.40. By October, however, ITV began to rise with the rest of the markets, reaching £2.55 on the eve of its third quarter figures in the middle of November.


(Source: IT-Finance.com 25/02/2016)

Despite the increasing deadweight that is ‘The X Factor’ ITV’s Q3 report revealed a 13% jump in revenue for the first 9 months of the year (to £2.3 billion), that growth given an extra boost in the third quarter, with the Rugby World Cup causing an 8% rise in ad revenue.

Perhaps most impressively ITV Studios saw a 28% surge in revenue (to £782 million) for the first three quarters of 2015, the company’s acquisition of media group Talpa (maker of ‘The Voice’, the singing competition soon to be leaving the BBC for ITV) giving a huge helping hand to the in-house production division. Yet even when the (somewhat artificial) boost of Talpa is removed ITV Studios still managed 9% in organic revenue growth, the likes of ‘Poldark’ providing some home grown success.

ITV’s third quarter figures allowed the stock to keep up its post-Black Monday recovery, eventually reaching £2.77 by the end of the year, a mere 5p away from its all-time peak. Yet the stock swiftly began to suffer as 2016 got underway, plunging below £2.50 by the 21st January. ITV did then manage a mild rebound as February approached, before the dire trading that kicked off that month took the stock all the way to a 5 and a half month nadir of £2.35. Since then ITV has just about lifted away from these lows, sitting at a current trading price of £2.50 (IT-Finance.com, 25/02/2016).

In terms of next week’s report analysts are expecting Q4 ad revenue to be around 3% (a quarter-on-quarter drop that really reveals how important the Rugby World Cup was), leaving the full year forecast at around 5%. CEO Adam Crozier, meanwhile, claimed back in November that the company was ‘on track for another year of double digit profit growth’. Any announcements surrounding the acquisition of ‘The Voice’, the heir apparent to ‘The X Factor’ may also be welcomed, whilst growth from ITV Studios will be scrutinised followed that explosive jump post-Talpa purchase.

ITV PLC has a consensus rating of ‘Hold’ with an average target price of £2.91.