- Berenberg say to sell shares with 56p price target
- Concerned about slowdown in TV advertising
- World Cup boost not enough to offset deteriorating market
Analysts at investment bank Berenberg have issued a ‘sell’ note on free-to-air broadcaster ITV (ITV) and slapped a 56p price target on the shares.
Despite the negative coverage, ITV shares were up 2.7% to 70.5p by mid-morning on Monday having fallen in early trading.
Berenberg’s reservations about the stock reflect its conversations with media buyers suggesting TV advertising demand has dropped sharply in the final quarter of the year. It notes other broadcasters have seen a deterioration in the market - including European broadcasters ProSiebenSat.1 (PSM:ETR) and RTL (RRTL:ETR).
‘Revenue has been running at above 2019 levels, despite a weakening economy and mid-teens consumption (minutes) decline, which implies double-digit effective price increases,’ Berenberg said. ‘Meanwhile, audience demographics continue to worsen.’
Berenberg’s analysts are also sceptical on the fortunes of the imminent ITVX streaming platform given how competitive the environment is.
WORLD CUP WON’T OFFSET UNDERLYING DEMAND DROP
ITV will be pinning a lot of its hopes for the final three months of 2022 on the boon of an unprecedented winter World Cup, with an aim of having ITVX up and running ahead of the tournament.
Berenberg commented: ‘ITV will benefit from the World Cup, but this will not offset the decline in underlying demand for TV advertising.
It added: ‘With advertising downgrades, and ITV committed to spending more on ITVX in 2023, operating leverage will be higher than ever. The company has been eking out cost savings for years, which will limit major incremental savings to offset ad weakness. We think street estimates need to drop further.’
Investors will get a picture of whether Berenberg is being overly bearish on ITV and its prospects when it publishes its third quarter trading update on Wednesday this week.
