ITV PLC (LSE:ITV) has been on a strong run on Wednesday but some City watchers are concerned the future won’t be all roses considering the huge competition it is up against.
Advertising is at record highs and the Studios arm, which produces popular programmes such as Gomorrah and Love Island, is forecast to deliver revenue of GBP1.7bn this year, doubling from last year’s GBP891mln.
But according to broker Shore Capital, growth is expected to slow down considerably, with the figure dropping to GBP1bn in 2022 and GBP1.1bn in 2023.
Analysts said they are positive on the outlook “for advertising spend as a whole” and bullish “on the strength of demand for broadcast content”.
The FTSE 100 firm plans to pour GBP1.1bn in its programming content next year, though streaming giants such as Netflix Inc (NASDAQ:NFLX), Amazon.com, Inc and The Walt Disney Company (NYSE:DIS) may have deeper pockets to finance production.
For instance, Netflix made quarterly revenues of US$7.4bn in the summer and is behind hits such as La Casa de Papel, Sex Education, The Queen’s Gambit and Korean sensation Squid Game, which was watched by 142mln member households in the four weeks after launching.
And while ITV plans to broadcast the FIFA World Cup next summer, Amazon’s Prime Video debuted its first-ever UEFA Champions League soccer matches in Germany and Italy last summer, claiming viewers for one of the most followed football tournaments in the world.
Disney is releasing its latest update later today, but its Disney+, Hulu and ESPN+ are expected to have continued grabbing market share and become an increasingly larger threat for their peers.
Analyst Neil Wilson at Markets.com said that “the longer-term doubts remain about the position of linear broadcasters in an on-demand world and its reliance on cyclical ad revenues”.
However, Keith Bowman at interactive investor remained optimistic and noted that shares are at a big discount to the big streamers, while dividends are due to restart soon.
“While ITV is a small player compared to the global giants, its strengths and pedigree are unlikely to be completely overlooked. As such and with analysts’ currently estimating a fair value price per share of around 139p, consensus opinion currently points towards a buy.”
Shares climbed 14% to 124.67p on Wednesday afternoon.