ITV (LSE:ITV) has been a staple in British living rooms for decades. As the largest commercial television network in the UK, it has been navigating the choppy waters of a rapidly changing media landscape. So with the ITV share price now below 60p, is it a must-watch, or are investors switching over?
What’s the story?
ITV, known for hits like Love Island and Coronation Street, isn’t just about soap operas and reality TV. It’s a multifaceted media conglomerate that spans broadcasting, production, and digital services. But like any good drama, ITV’s journey has its share of twists and turns.
In the era of streaming giants like Netflix and Amazon Prime, ITV has had to reinvent itself. Its response? ITV Hub and BritBox, a joint venture with the BBC, offering a uniquely British streaming experience. But the question remains: can it compete with the big boys of streaming? The ITV share price suggests that investors aren’t convinced. In the last five years, the company is down over 60%.
The finance picture
Let’s talk numbers. ITV’s financial performance is a mixed bag. On one hand, advertising revenue, its bread and butter, has seen fluctuations. The pandemic hit it hard, but there’s been a rebound thanks to events like the World Cup. On the other hand, ITV Studios, its production arm, is a shining star, creating content not just for ITV but for other networks worldwide. The standout performer saw its revenue increase by 8%, reaching £1bn.
But here’s the kicker: While traditional TV viewing is declining, online viewing is skyrocketing. ITV’s digital strategy seems to be paying off, with ITV Hub registrations and BritBox subscriptions on the rise.
Compared to the wider entertainment sector, ITV shares have a price-to-earnings (P/E) ratio of 8.7 times, much lower than the average of 17 times. Furthermore, a discounted cash flow calculation puts the fair value of the ITV share price at £1.63, considerably above the current price of £0.60. So as uncertain as things look for the sector, there could be a tremendous potential for investors who are willing to play the long game.
ITV isn’t resting on its laurels. It’s investing in digital transformation, original content, and international expansion. The focus is on becoming a more robust, diversified media entity.
The company has planned to invest approximately £180m in ITVX, reflecting its commitment to digital acceleration and the transformation of its business model.
But it’s not just about content, it’s also about technology. ITV is exploring advanced advertising techniques and data analytics to better understand its audience and deliver targeted ads, a potential game-changer in boosting ad revenue.
The competition is fierce, and the cost of content is soaring. Plus, there’s the ever-present threat of regulatory changes, especially in the dynamic media landscape.
ITV is at a crossroads. Its traditional TV business faces challenges, but its digital ventures show promise. With a strategic blend of content creation, digital innovation, and savvy market positioning, it’s striving to remain a key player in the UK media landscape.
So, will its story have a happy ending? I see there being potential in the company, but with so much competition in the space from bigger and more powerful global companies, I don’t want to risk buying ITV shares for now.