JPMorgan Cazenove has raised its target price for ITV plc (LON:ITV), one day ahead of the commercial broadcaster’s first-half results, in a bullish review of the European broadcasters, with the UK firm one of two key sector picks.
The US bank upped its target for the FTSE 100-listed firm to 240p from 200p, with the stock currently changing hands at 172.35p each, up 0.9% on Monday’s close.
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In their note, the JPMorgan analysts said: “We believe valuations are cheap (10.5x 2019 EPS), structural concerns are overstated and a transformed user experience, new revenue streams and M&A potential are overlooked.”
They added; “Our longer-term forecasts imply upside across the group but broadcasters typically struggle to perform in the slowdown phase of the investment cycle.”
The analysts said they maintained a selective approach with ITV and Germany’s ProSieben their key European broadcasting picks.
They pointed out that US broadcasting is seeing horizontal and vertical consolidation and international expansion, in response to declining pay-TV penetration, as well as to drive convergence benefits and support the development of direct to consumer and addressable TV.
European starting point very different
The analysts said the starting point in Europe is very different, with broadcasters coming from a lower basis of monetization and a beneficiary of declining pay-TV penetration.
They added: “We see scope for broadcasters to co-operate and consolidate to create national streaming platforms, greater scale in production and savings/synergies in technology investment.
“We see scope for cross-media consolidation and vertical integration to drive a virtuous circle of content investment and distribution.”
The analysts noted the free-to-air broadcasters can also offer an attractive alternative for US media seeking content and direct-to-consumer relationships in Europe.