Near 85p, the ITV (LSE: ITV) share price is as low as it was just over 10 years ago. But the business has a global reach and a plan for growth. And I think the recent stock weakness looks unfair.
A decade ago, ITV moved higher driven by good performance in the business. And by the summer of 2015, it was three times the price.
Executing well
Of course, the history of the stock is no guarantee that positive outcomes will repeat. Indeed, it’s around 25% lower than it was a year ago. And that may be a concern. However, I’m hopeful current weakness in earnings is due to nothing more than the short-term challenges of volatile costs.
After all, the integrated producer broadcaster is executing well. For example, in January the company said the launch of its new streaming service, ITVX, has been successful. And there’s been a 55% year-on-year increase in streaming viewing and a 65% increase in online users from 8 December 2022 to 7 January.
Chief executive Carolyn McCall said the football World Cup was an “important” driver. But, excluding the footy, the underlying viewing via streaming during the month rose by 29% year on year. And many new viewers have come from “hard-to-reach” audiences. They’ve been attracted by a “strong slate of commissioned launch titles exclusive to ITVX”.
Crucially, McCall added that “ITVX has also landed really well with advertisers who see the increased value of the scale and reach of the audience they can now target.” And to me, the implication is the new service looks set to catalyse higher revenues and profits ahead.
Multiple streams of revenue
But ITVX isn’t the only part of the business that’s been performing well. The firm’s ITV Studios division is one of the biggest global creators, producers and distributors in the world. And more than 55% of its revenue comes from outside the UK.
Then there’s ITV’s Global formats and distribution business that focuses on the sale and “exploitation” of unscripted formats globally. And it also generates revenue from licensing the company’s brands for games, live events and merchandise.
On top of that, the Media & Entertainment operation is home to the ITV family of channels and platforms. And according to the company it’s “the largest family of free-to-air commercial channels in the UK”. Indeed, ITVX is one part of that division.
However, one thing that worries investors about the business is its cyclicality. There’s a fair reliance on advertising revenue and that’s vulnerable to the ups and downs in the wider economy. But it actually has multiple revenue streams. In addition to advertising, it derives income from commercial partnerships, subscriptions, original production, distribution and from licensing its HD channels and streaming services.
My feeling is the income of the business might be more robust than many assume. And the directors are pushing for growth. For example, the company’s vision for 2026 is to be “a leader in UK streaming and an expanding global force in content”.
There’s no certainty the firm can realise its ambitions profitably. And I could even lose money on the shares by investing now. Nevertheless, if I had spare cash, ITV would tempt me today.
