On Friday, JPMorgan updated its stance on ITV Plc (LON:ITV:LN) (OTC: ITVPY) shares, increasing the broadcaster's price target from GBP1.12 to GBP1.20 while maintaining an Overweight rating. The adjustment follows a reassessment of the company's advertising growth and earnings potential.
The firm revised its forecast for ITV's full-year advertising growth from a modest 0.4% to a more robust 5%. This change is based on an 11% growth prediction for the first half of the year and an expectation of steady revenues in the second half.
The analyst noted that the first quarter's performance exceeded expectations with a 3% increase and anticipates the second quarter could see a surge close to 20%, surpassing ITV’s own guidance of 12%.
The upbeat assessment is partly attributed to the anticipated impact of the final rounds of the Euros, which could enhance advertising revenue in July. Additionally, postponed spending from the Central Office of Information (COI) is expected to help balance the challenging comparisons with the previous year's Rugby World Cup in the latter half of the year.
In line with these forecasts, JPMorgan economists have also revised their real GDP predictions for 2024 and 2025 upwards. Initially set at 0.4% for 2024 and -0.1% for 2025, the new forecasts stand at 0.9% and 0.8%, respectively.
Reflecting these macroeconomic adjustments, the analyst projects a 16% increase in ITV's earnings per share (EPS) for 2024, positioning it 17% higher than the Bloomberg consensus.
In other recent news, ITV Plc has been the subject of analysis by two prominent financial institutions, Citi and Deutsche Bank. Citi has maintained its 'Buy' rating for ITV, underlining the potential benefits of its advertising technology platform, Planet V.
This platform, as highlighted in ITV's investor seminar, offers a more dynamic approach to selling commercial space and is anticipated to expand the broadcaster's advertiser base.
On the other hand, Deutsche Bank has adjusted its price target on ITV to GBP0.90 from GBP0.80, while retaining a 'Hold' rating. This adjustment follows ITV's first-quarter trading update for 2024, which reported a 3% growth in Total Advertising Revenue (TAR), but a 16% drop in Studios revenue.
In terms of future developments, ITV projects a robust 12% surge in TAR for the second quarter, driven by a compelling program lineup including the 2024 Euros. However, it is important to note that the company's Studios business could face challenges due to strikes by US actors and writers, causing an estimated GBP80 million in revenue to be deferred to 2025. Despite these potential setbacks, ITV management remains optimistic about the stability of Studios revenue throughout the year.
InvestingPro Insights
Following JPMorgan's positive outlook on ITV Plc, InvestingPro data echoes some of the optimism surrounding the company's financial health. ITV Plc's market capitalization stands at a solid $4 billion, and the company has a price-to-earnings (P/E) ratio of 14.85, which is even more attractive when adjusted for the last twelve months as of Q4 2023, at 10.84. This indicates a potentially undervalued stock, especially considering that ITV Plc's dividend yield is a significant 9.52%, rewarding shareholders handsomely.
Moreover, the company's stock has experienced a large price uptick over the last six months, with a 25.67% return, and is trading near its 52-week high, at 95.38% of the peak price. This performance aligns with InvestingPro Tips that highlight ITV Plc's low price volatility and its ability to pay a significant dividend to shareholders. Additionally, the company has been profitable over the last twelve months, and analysts predict profitability will continue this year.
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