It sounds like a rap sheet, but Goldman Sachs’ Conviction List outlines the stocks on which it is most bullish and bearish.
Removal from the Conviction Buy List can mean a couple of percent off the share price.
In the case of ITV PLC (LON:ITV) earlier Wednesday the move by one Wall Street’s most influential investment banks was met by the market with a shrug and a 0.7p fall in the value of Britain’s largest commercial broadcaster.
READ: Caz turns bearish on broadcaster
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Given the stock is currently changing hands for 217p that barely counts as a ripple.
“We see greater upside potential elsewhere,” said Goldman in a note to clients. It maintains its ‘buy’ call, but it is just a plain, solitary ‘buy’ not a big bold Conviction Buy.
Goldman said ITV is better placed than its peers having diversified away from being a purely advertising-driven play. Content – in other words dramas such as Broadchurch and Prime Suspect 1973 – now account for a third of its revenues.
Remember there is a ready market for good TV box sets and comedies with the rise of on-demand web services such as Netflix and Amazon Prime.
While the share price has come off the boil of late, ITV still represents one of the most plausible take-out targets in the broadcast sector, Goldman said, given the aforementioned “content exposure” and the “lack of ownership restrictions”, and with US cable giant Liberty Global (NASDAQ:LBTYA) holding a near 10% stake.
Headwinds eyed ...
However, near-term there are headwinds, one of them being declining advertising spend.
This has led to a downward tweak to the American bank’s forecasts on net advertising revenue for the current year. Similarly, the price target has been pegged back a tad to 256p a share from 257p.
Around 30% of that valuation is M&A supported – in other words Goldman reckons there is a more than fleeting chance of a bid for ITV, which is currently valued at £8.7bn.
Of the 19 companies logged as following the company, nine have ‘buy’ recommendations on its stock. Two are ‘sellers’, while the remainder think it is fully valued.
The consensus price target, 240p six months ago, is currently 224p.