ii view: is ITV a global streamer in the making?

Its own Studios business making programmes for rivals and thousands of hours of content to stream. Buy, sell, or hold?

First-quarter trading update to 31 March

• ITV Studios revenue flat at £457 million
• Media & Entertainment revenue down 9% to £495 million
• Net debt up 7% from the previous quarter to £668 million

Guidance:

• Expects ITV Studios to deliver at least 5% average organic revenue growth per year to 2026
• Expects Media & Entertainment in Q2 to continue to see strong growth in digital advertising with revenues expected to be up over 20%

Chief executive Carolyn McCall said:

“ITV continued to make significant strategic progress in the quarter and all parts of the business
performed in line with expectations.

“ITVX has sustained its strong launch, with a 49% increase in streaming hours and a 29% growth in digital revenue in the quarter. ITV Studios continues to demonstrate significant strategic momentum.

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ii round-up:

ITV (LSE:ITV) is an integrated producer and broadcaster. 

Its Media and Entertainment business delivers content through linear TV broadcasting as well as digital on-demand platforms.

Its Studios business produces, owns and distributes content for both ITV channels and third parties in the UK and overseas. 

For a round-up of these latest results announced on 11 May, please click here.

ii view:

A constituent of the FTSE 250 index, ITV is currently pursuing three core strategic pushes. These are to expand its UK and global production business, grow its Streaming business now under the ITVX platform and optimise its Broadcast business. The Studio division operate in 13 countries. Its Media & Entertainment business is both the biggest commercial linear TV channel broadcaster in the UK with an audience share of 33.8% and has 19,000 hours of content available on ITVX.   

For investors, a tough economic backdrop and a retreat in advertising sales for its traditional broadcast channels are not to be overlooked, with the importance of the sporting calendar in generating ad sales a factor. A push towards streaming via ITVX leaves it competing against global players such as Netflix Inc (NASDAQ:NFLX), The Walt Disney Co (NYSE:DIS) and Amazon's (NASDAQ:AMZN) Prime TV, while content production at the Studios division also leaves it toe-to-toe with these same major players. 

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On the upside, a diversity of revenues exists, content is sold to other broadcasters including the likes of Apple, advertising sales are made at both its traditional TV channels and via its streaming service. ITVX can also be taken with the option of a monthly streaming subscription fee, but with the benefit of no adverts and access to additional content. An estimated one-year price/earnings (PE) ratio comfortably below media rivals such as Netflix may suggest the stock is not obviously expensive, while the shares trade on a forecast dividend yield of over 6%. 

For now, and while ITV remains something of a work in progress, a consensus analyst estimate of fair value at over 95p per share arguably gives scope for longer-term fans to stay positive. 

Positives: 

• Diversity of revenues
• Attractive dividend (not guaranteed)

Negatives:

• Intense global competition
• Advertising revenues are economically sensitive 

The average rating of stock market analysts:

Buy