The ITV (LSE: ITV) share price took a hit on 25 July, when the TV giant posted a 2% drop in H1 revenue.
From market close on the day before the results to the price at the time of writing, the share price lost 5%.
I guess that’s not too bad, and we’re still looking at a 26% gain so for in 2024. Oh, but a 29% fall over the past five years.
Profits up
Though revenue fell modestly, adjusted earnings before interest, tax, and amortisation (EBITA) rose 40%, and adjusted earnings per share (EPS) gained 43% to 3.3p.
CEO Carolyn McCall said: “Our digital advertising business continues to go from strength-to-strength and we saw a 17% increase in digital advertising revenue in the period, which contributed to the 10% increase in total advertising revenue.“
Weakening advertising revenue has been behind much of the concern over ITV’s profitability in the past few years. So anything like a “strength-to-strength” change has got to be good.
But the key weakness seems to have shifted, with ITV Studios H1 revenue down 13%. The firm blamed the 2023 US writers’ and actors’ strikes for delaying revenue of around £80m in 2024 and 2025.
And that’s got to be behind the disappointing market reaction.
What now?
All in all, this set of results has to be considered mixed. And the long-term success of ITV will depened a lot on the progress of its content production. But right now, it looks like the setback from 2023 will send ripples through at least the next two years.
Still, there’s a consensus price target out there of 96p for the ITV share price. And that’s 19% ahead of the price I see now. Is that realistic?
Well, previous guidance had revenue flat in 2024. But the board revised that downward, to a low single-digit decline.
Rising earnings
Forecasts will presumably edge down a bit now. And I expect the forward price-to-earnings (P/E) ratio of 12 will increase a bit.
Looking at expectations for 2024 alone, I’d say ITV shares are probably priced about right at the moment. And that takes into account a forecast 6.2% dividend yield, pushed up by the share price fall.
It’s too soon to tell if we’ll need to lower our hopes on that front. But at least the company kept the interim payout steady at 1.7p per share.
Looking ahead to the next few years, though, I’m remaining bullish for the stock. I had hoped this H1 update might give the price the kick it needed, but clearly that didn’t happen.
Risky optimism
The second half, and possibly well into 2025, looks like it will be clouded with uncertainty. And that could keep the shares weak for a while yet.
But I’m still upbeat about the long-term outlook for ITV, and for FTSE 250 stocks in general. It’s a buy candidate for my next Stocks and Shares ISA purchase, for sure.
