ITV share price forecast: Streaming great results at low stock prices?
ITV (ITV) began broadcasting in 1955. A constituent of the FTSE 100, the company’s listed on the London Stock Exchange (LSE).
It aims to be a market leader in the UK streaming business by 2026 through content production and distribution.
ITV is the UK’s oldest commercial TV network – 13 of its 15 regional television licences are held by ITV plc. Operating as an integrated producer broadcaster (IPB) entity, ITV’s business is broadly divided into ITV Studios and Media & Entertainment (M&E).
ITV Studios creates programmes in-house and for channels like the BBC and global streaming platforms. The company’s content is distributed by its Media & Entertainment arm. It engages audiences through its streaming and subscription platforms, ITV Hub, ITV Hub+ and BritBox UK.
On 3 March 2022, the company released its full-year financial results for 2021, reporting external revenues of £3,453m. Its share price fell after annual results were published. From a close price of 110.65p on 2 March 2022, ITV closed at 80.22p on 3 March 2022. It closed at 82.14p on 24 March 2022. What could be the underlying reasons behind such a drop? Join us as we undertake an ITV share analysis and outline a plausible ITV share price prediction.
Stock fundamental analysis: Full year earnings
On 3 March 2022, ITV released full-year results for the year ended 31 December 2021. It reported total external revenue growth of 24%. At £3.45bn, overall revenue grew significantly from 2020’s £2.78bn.
Across the group’s two reportable business segments of ITV Studios and Media & Entertainment, double-digit growth in revenue was observed. Owing to a wide variety of new programmes and returning shows such as Love Island, Scripted and Good Witch, ITV Studios revenue grew by 28%, rising from £1.37bn in 2020 to £1.76bn in 2021.
M&E reported total revenues of £2.28bn, which accounted for an increase of 21% from 2020 revenues of £1.88bn. ITV’s total advertising revenue (TAR) reached an all-time high, increasing by 24% from £1.57bn to £1.95bn.
Exercising tighter cost controls on expenses, the company saved approximately £37m in 2021. Adjusted earnings before interest, tax and amortisation (EBITA) were reported at £813m, reflecting an upward adjustment of nearly 42% from its previous year’s EBITA of £573m.
Gaining strong momentum in the advertising market and successful execution of the first phase of its More Than TV strategy, ITV was able to translate value to its shareholders through increased earnings per share (EPS) for 2021. As compared to 31 December 2020, adjusted EPS was up from 10.9p to 15.3p.
ITV announced its Digital Acceleration Plan – phase two of its More Than TV strategy. Through ITVX, its first integrated AVOD/SVOD platform in the UK, the company hopes to provide a seamless viewer experience with digital-first content.
Between 2022 and 2023, ITV plans to invest approximately £180m in ITVX.
By 2026, the company expects to double its digital revenue from its M&E business to £750m. With its Digital Acceleration Plan, ITV looks to concentrate on its streaming business and further the reach of its ITV Hub, ITV Hub+ and BritBox platforms.
Carolyn McCall, CEO of ITV, elaborated on the company’s future plans:
Recent stock price movements
Ever since full-year 2021 financial results were published, the ITV stock price has been trending at its lowest since the Covid-19-induced lows of 2020. Despite reported profits and operational efficiencies, investors seem sceptical of the company’s prospects.
The group is aiming to increase viewing hours on its streaming platforms through high-quality shows. For this purpose, ITV reported a total content investment budget of £1.23bn in 2022, increasing incrementally to £1.35bn in 2023 and remaining at the same investment pace going forward. At a broader level, its digital-first content investment for ITVX is expected to touch £20m in 2022 and £160m in 2023.
According to The Motley Fool, with other streaming giants like Netflix and Disney+ to compete against, ITV’s plans for original content production are fraught with risk. That risk has translated into a significant stock price drop.
Stock future price forecasts and technical view
Milan Vaishnav, CMT, MSTA, a consulting technical analyst at Gemstone Equity Research & Advisory, shared a technical view on the ITV share projections:
Algorithmic-based platform Wallet Investor, as of 25 March 2022, suggested an ITV share price target of 62.289p by December 2025. In its ITV share price forecast for 2022, it said that the price could be in the range of 77.744p to 82.677p by the end of the year.
In its ITV share forecast, AI Pickup predicted an average share price of 52.58p for 2030.
When considering whether to invest in the ITV stock, you should always do your own research, considering the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which it trades and your risk tolerance. And never invest money that you cannot afford to lose.
FAQs
Are ITV shares a good buy?
While the ITV shares reported strong revenues and profits in its 2021 full-year financial results, it has ambitious spending plans for producing original content. The management anticipates covering its spending costs with future incremental revenues.
Whether ITV stock is a suitable investment depends on your own investment objectives. You should conduct your own research in deciding if ITV stock is ‘buy’, ‘sell’ or ‘hold’. It’s important to reach your own conclusion on a company’s prospects and the likelihood of it achieving analysts’ targets.
Why have the ITV shares prices been going down?
As a result of the company’s big-spending plans toward original content production, investors could be sceptical of its prospects in a competitive market.
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