ITV PLC (LSE:ITV) has been downgraded by Barclays Capital, which believes the free-to-air-broadcaster made a mistake in the way it invested into its new on-demand services.
According to the investment bank, the maker of Vera and Ant & Dec’s Saturday Night Takeaway should have put the £205mln investment into ITVX in one go rather than in three separate tranches.
While Barclays noted that more money was going into the platform, it comes at a cost of declining earnings per shares (EPS) in the next two fiscal years.
“In a market where investors are highly sceptical of broadcasters' prospects, we are not surprised by the stock price reaction which is more or less in line with the EPS downgrade,” the bank said in a note to clients.
“With such scepticism, we think ITV needs to see EPS upgrades to have any chance of performing, something that likely won't happen soon.”
Barclays moved to ‘equal weight’ from ‘overweight’ while snipping back its price target to 95p from 160p.
It only upgraded in late January, and it had hoped the latest update would herald a short-term increase in advertising and greater disclosure.
“Short-term advertising is indeed much better than consensus but the upgrades we hoped for have turned into a significant downgrade (30%+) because ITV has decided to double down on AVOD/SVOD [ad-based and subscription-based video on demand] and disclosure has not improved,” it concluded.
Shares were changing hands at 74p as of Friday afternoon, down 7.74%.