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This is what I’d do about the ITV share price today

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Private investor buying UK shares at home
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The ITV (LSE: ITV) share price has been on blistering form of late. The UK broadcasting share has just about doubled in value over the past 12 months. It’s now almost reversed all of the losses it endured during the 2020 stock market crash.

Yet despite these gains I think the ITV share price still looks mighty attractive from a value perspective. City analysts think that the former FTSE 100 share will endure a slight 2% drop in annual earnings in 2020. However, this still leaves the company trading on an undemanding price-to-earnings (P/E) ratio of 13 times. The Coronation Street and The Masked Singer broadcaster also packs a handsome forward 4.5% dividend yield.

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Can this FTSE 250 stock continue to surge in value, though?

Positive signs for the ITV share price

There are several reasons why I think the ITV share price could continue soaring in 2021 and beyond:

#1: A continued rebound in advertising spending. Ad revenues are of course the lifeblood of the commercial broadcasting industry. So it’s no surprise that ITV’s profits (and consequently share price) fell sharply in 2020 as advertising budgets took a bath. Signs of improvement on this front have emerged recently, though. Consequently ITV reckons total advertising revenues will be up between 5% and 7% in the four months to April. Industry gurus at WARC believe global ad spending will rebound 6.7% over the course of 2021.

#2: A strong VOD proposition. ITV has been heavily investing in its video on demand (or VOD) proposition in recent years. It shows, with subscription numbers at both its ITV Hub and part-owned BritBox systems soaring. The business is accelerating development here too by improving the content and functionality of its platforms.

#3: ITV Studios returns to work. ITV’s bottom line also suffered badly last year because programme-making came to a halt at its ITV Studios production unit. Revenues here tanked 25% year on year as sets were closed down. But with Covid-19 infection rates in the UK falling, the division could be on the cusp of getting back to producing hits like Love Island and I’m A Celebrity…Get Me Out Of Here!

Buyer beware

Naturally it’s too early to say that ITV’s share price could build on its recent strong gains. This highly-cyclical share could suffer from a bumpy economic recovery that would squeeze advertising budgets again. The emergence of Covid-19 variants might also force workers at ITV Studios to down tools once more.

And ITV’s risks stretch well beyond the short-to-medium term as well. Competition in the broadcasting arena is particularly fierce and the streaming services of US shares like Netflix, Disney, Amazon and Apple are fighting desperately hard to win viewers. ITV has a hell of a battle on its hands to keep people tuned into its traditional and VOD viewing platforms.

In conclusion

That being said, I still think there’s plenty for long-term investors to like at the FTSE 250 broadcaster. And I think the ITV share price offers excellent value at current levels around 125p. I’d happily buy this UK share for my own Stocks and Shares ISA today.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Apple, Netflix, and Walt Disney. The Motley Fool UK has recommended ITV and recommends the following options: short March 2023 $130 calls on Apple, long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long March 2023 $120 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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