So far, 2023 has been a good year for shareholders of ITV (LSE: ITV). The ITV share price has leapt 16% since 30 December. Also, it has skyrocketed since its September lows. As an ITV shareholder I’m expecting more gains for this FTSE 250 stock.
The share price’s long decline
In early July 2018, the ITV share price closed above 180p, but it’s mostly been downhill from there. Before Covid-19 swept the world in spring 2020, ITV shares closed at 136p on Valentine’s Day 2020. But then they crashed hard, plunging to post-global financial crisis lows.
At their 52-week high, ITV shares hit 121.65p on 17 February 2022. But then they absolutely bombed, collapsing to a 52-week low of 53.97p by 29 September. At that time, they looked like a brilliant bargain, so I’m gutted that we missed out on buying more.
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Bouncing back
The good news for existing shareholders is that their shares have soared since September. On Friday, this stock closed at 89p, valuing the broadcaster and media-content producer at £3.6bn. In other words, the shares have surged by almost 65% from their 2022 low. Nice.
Despite this impressive comeback, ITV shares have lost 24.5% of their value over one year. Even worse, they’ve almost halved over five years, losing 49%. In short, owning them has been a disappointment for a fair few years. But I suspect that might be about to change.
ITV = intrinsic, tangible value?
For the record, my wife bought ITV shares for our family portfolio in late June 2022. She paid an all-in price of 68.7p. To date, we’re sitting on a paper profit of 29.6%. Not bad, but I have much higher hopes for the shares.
For me, there’s a lot to like about ITV. It’s the UK’s leading terrestrial commercial broadcaster, airing such big hits as Love Island. I don’t watch this show, but know many youngsters who love it. Also, the firm is a leading content provider for media companies worldwide.
Founded in 1955, ITV has a 67-year pedigree. Yet these old-school shares still look cheap to me. They trade on a modest price-to-earnings ratio of 7.6, which translates into an earnings yield of 13.2%. That appears very cheap versus the wider FTSE 350 index.
What’s more, the shares offer a market-beating dividend yield of 5.7% a year. That’s around two percentage points higher than the blue-chip FTSE 100. Even better, this cash yield is covered 2.3 times by trailing earnings. To me, this suggest the payout is safe, for 2023 at least.
That said, very dark clouds are hovering over the UK economy. Thanks to soaring inflation, sky-high energy bills and rising interest rates, British consumers are really struggling. And the UK is likely to go into recession in 2023, crimping ITV’s core advertising revenue.
But while this weakness might hit its shares in the short term, I’m bullish on the stock for the long term. And with rumours of a potential takeover bid briefly pushing the price above 95p earlier this month, we won’t sell at anywhere near the current share price!
