Despite rallying 15% over the last month, based on HSBC's projected underlying earnings (EBITDA), the stock still trades at a discount of more than 30% to the STOXX 600 Media index.
“We believe that a lot of the potential negatives are discounted, expectations have bottomed and the market has formed a view that ‘everything is bad’. This arguably leaves room to beat expectations and close some of the discount to peers,” HSBC said, as it increased its price target from 200p to 210p.
ITV has indicated that non-advertising revenue (NAR) in the third quarter would be down by around 4% year-on-year; HSBC thinks it will be slightly better than ITV had been predicting, at -3.5%, thanks to a decent September, where media buyer commentary indicates ITV's NAR was down 1%.
It is probably too soon to call the bottom for ITV, HSBC concedes, but comparatives become a lot easier in the coming three quarters, which could see the consensus forecast of a full-year NAR year-on-year change improve from its current level of -5.8%.
On top of that, 2018 will see the FIFA World Cup tournament, with ITV sharing terrestrial coverage with the BBC in the UK, which should juice up advertising revenues.