Shore Capital has reaffirmed its 'buy' recommendation on shares in ITV PLC (LSE:ITV), setting a target price of 116p per share, which represents an approximate 61% upside from the current stock valuation.
This endorsement follows the media giant's announcement of its full-year results, which, despite a challenging backdrop, demonstrated strong strategic execution and robust performance across its operations.
ITV's financial performance in 2023 showed resilience against some tough headwinds with a revenue dip of 3% year-on-year and an adjusted EBITDA decline of 36%, primarily due to lower advertising revenues and strategic investments in content for its streaming service, ITVX.
However, the firm's net debt improved, ending the period at £553 million, thanks to solid working capital management, alongside a maintained full-year dividend of 5p.
Noteworthy was ITV's digital momentum, particularly with ITVX, which saw streaming hours and monthly active users increase by 26% and 19%, respectively.
The media and entertainment division faced a 7% revenue decline, reflecting broader market challenges. Nonetheless, digital revenues surged by 21% year-on-year, underlining ITVX's growing contribution to the business.
ITV Studios, the company's content production arm, reported a 4% revenue increase and improved profitability.
The division's success in delivering a substantial slate of content, both domestically and internationally, highlights its importance to ITV's broader strategy.
Management's outlook for the current financial year is positive, with anticipated growth in digital revenues and an optimistic view on advertising spend recovery, bolstered by major events like the Euros.
Shore's updated forecasts for ITV are reasonably bullish, adjusting EPS estimates upwards by 8% for FY24 and FY25. These revisions reflect not just a solid performance and strategic progress but also the benefits of a comprehensive cost-reduction programme that is expected to deliver significant savings earlier than planned.
In late morning trade the stock was changing hands for 71.74p, up just under 1%.