FTSE 250 incumbent ITV (LSE: ITV) has seen its shares fall sharply in recent years. The old adage ‘too big to fail,’ continues to rattle around in my head, although I know it is possible. Let’s dig deeper to see what’s happened and if there’s a buying opportunity here.
No introduction needed!
Now I know some people (I don’t know many of them personally) don’t watch television. However, I don’t think I need to introduce ITV or explain what it does.
Let’s instead start by examining what’s happened to ITV shares in recent times. As I write, they’re trading for 60p. Over a 12-month period, the shares are down 21% from 76p to current levels.
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The shares looked to be heading upwards but macroeconomic volatility pulled them back. They’ve dropped from 2023 highs of 90p in February, to current levels, which is a 34% drop.
Since prior to the pandemic, they’re down 59% from 147p to current levels.
So what’s happened, you’re wondering? I’ll break it down into more recent and slightly older developments. The former has been due to massively declining advertising revenues, which is a huge money maker for ITV. The latter is due to the rise of streaming giants and disruptors such as Netflix, Amazon, Apple, and others offering consumers quality alternatives at their fingertips.
To buy or not to buy?
There are three main bullish aspects that help me veer towards buying ITV shares. First of all, the business had revamped its streaming offering, now known as ITVX. This has helped boost its viewership and keep in touch with the way viewers consume content these days.
Next, ITV Studios continues to create and provide quality hits such as I’m a Celebrity… as well as Love Island. This will help performance and investment viability increase, in my opinion.
Finally, I can’t help wondering if advertising revenues will rise when macroeconomic volatility subsides. If so, that would be positive for ITV too.
From an investment perspective, a price-to-earnings ratio of eight and a dividend yield of 8% help my investment case. However, I understand dividends are never guaranteed.
From a bearish perspective, continued volatility could mean ITV shares remain in the doldrums as advertising levels continue to remain subdued. Remember, this is one the FTSE 250 incumbent’s biggest money makers.
Moving on, the continued rise and success of other streaming giants is a major concern for me. The quality, variety, and pace at which major players in the market churn out content is concerning for ITV, if you ask me.
My decision
Taking everything into account, I’d be willing to buy some ITV shares when I next have some cash to invest. I reckon it is a great opportunity to buy the dip.
Its continued investment into its own content as well as positive momentum on the streaming front helped me make my decision. Furthermore, an enticing valuation coupled with a passive income opportunity are too good to ignore. Finally, I reckon advertising revenue will increase when macroeconomic turbulence dissipates. This could boost performance and help ITV shares move upwards.
