ITV 2021 preview: Where next for the ITV share price?

Remote pointed at TV with a streaming service in background
Josh Warner
By :  ,  Market Analyst

When will ITV report 2021 earnings?

ITV is scheduled to publish its full year results for 2021 on the morning of Thursday March 3.

 

ITV 2021 earnings preview

ITV shares have struggled to find higher ground over the past 14 months, having risen just 3.7% and significantly underperforming the FTSE 100 that has jumped over 15% in the same time frame.

That is despite ITV seeing record demand for advertising on its platforms in 2021, including its main ITV channel and its streaming platforms like ITV Hub and BritBox, and the fact ITV Studios is getting back to normal after filming was significantly disrupted during lockdowns at the height of the pandemic in 2020.

Group external revenue – the main topline measure to watch – is forecast to jump almost 22% year-on-year to £3.39 billion in 2021 from the £2.78 billion reported in 2020. Adjusted Ebita – ITV’s headline earnings measure – is forecast to jump almost 40% to £801.0 million from the £573.0 million booked the year before.

ITV’s adjusted EPS is expected to jump almost 42% to 15.0p from the 10.9p reported last year and that will be the first annual rise since way back in 2016. Reported EPS at the bottom-line is also set to grow to around 10.0p from just 7.1p.

It has been an important year for its biggest division that homes its broadcast operations. The company has already said advertising revenue, its bread-and-butter, will rise about 24% in 2021 to hit a record high. That will also be some 11% above pre-pandemic levels.

Demand for advertising on its services surged in 2021 as businesses tried to woo consumers as the economy bounced back from lockdowns, with many having drastically cut their budgets during the height of the pandemic in 2020. ITV has also made efforts to expand its reach and has benefited from its new Plant V platform used by advertisers and broadcasters to manage advertising across both the linear and online markets.

The fact ITV operates in both linear and online markets provides the diversity needed to attract advertisers. TV advertising can offer maximum reach while free streaming services funded by ads like ITV Hub continue to grow, with the service boasting almost 35 million users at the end of September compared to just 32 million a year earlier. Meanwhile, some analysts have noted that the privacy changes introduced by Apple last year that has made it more difficult for advertisers to target their material at users on social media platforms has also prompted companies to shift more of their marketing dollars into other areas like TV and video.

Analysts have forecast overall revenue in the broadcast unit will rise by 21% and the improvement will also help the division report a significant improvement in earnings, which are forecast to come in at their highest level since 2017.

Broadcast (£, Mns)

2019

2020

2021E

Revenue

2,063

1,890

2,286

Adjusted Ebita

462

421

590

(Source: Eikon)

Meanwhile, ITV Studios, responsible for producing swathes of content for ITV’s TV channels those owned by its rivals, is expected to see revenue and earnings rise from subdued levels in 2020, although remain below 2019 levels.

ITV Studios (£, Mns)

2019

2020

2021E

Revenue

1,822

1,370

1,664

Adjusted Ebita

267

152

211

(Source: Eikon)

ITV said it would turn around 60% of its profits into cash in 2021, having raised its ambitions from the original 30% target thanks to the bigger than expected rise in advertising revenue.

ITV has pledged to reintroduce dividends this week and make a final payout of 3.3p for the year after scrapping them when the pandemic hit. That is based on a notional payout of 5.0p per year, which will be used as the comparative for any payouts made in 2022.

Turning to 2022, the focus will be on the outlook for advertising demand. Currently, analysts believe advertising revenue will stay broadly flat in 2022 versus 2021 as marketing budgets normalise. ITV could provide a catalyst for its shares if it can post a rosier outlook for advertising this year than what markets expect.

Things should also continue to normalise for its productions barring any new coronavirus variants or new lockdown measures being introduced, with analysts currently expecting an 8.8% revenue rise from the unit in 2022. Its budget for programming will rise about 5% to £1.16 billion in 2022. ITV has said it has a ‘strong programming slate’ prepared for this year, driven by new dramas and sports events including the FIFA World Cup and the FA Cup.

Current consensus figures show markets currently expect ITV’s adjusted Ebita to experience a mild 0.7% fall in 2022.

ITV shares spiked over 15% in early November when it said it expected record ad revenue in 2021, but shares have given back most of those gains and now trade just 0.9% higher than before that last update, suggesting attention has shifted more toward the anticipated slowdown in 2022 than the strong performance investors expect to see in 2021.

 

Where next for the ITV share price?

ITV shares have proven volatile since its last update in early November, but the stock has been forming waves of higher highs and higher lows since mid-December. With this in mind, the 106.65p level of support seen in January has to hold to keep this trend alive and to avoid bringing the December low of 104.50p into play. However, the RSI is trending deeper into bearish territory and that signal is reinforced by the fact the shorter-term moving averages remain below the 200-day sma.

On the flip side, sellers have unsuccessfully tested 108p both today and yesterday, suggesting this could form a the next higher low in the trend. So long as the 106.65p floor holds, the stock looks poised to swiftly recapture all three moving averages as it has done three times in the last four months, ultimately targeting the 200-day at 116.2p before aiming to move above the 2022-high of 124.0p to form the next higher high. The next target beyond there would be the November-high of 127.0p.

ITV shares have trended higher since late 2021

 

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