ITV shares up over 100%, but can OTT content fuel further growth?
The ITV share price continues to recover from last year’s slump. However, despite positive ratings from analysts and new Over The Top (OTT) content aspirations, could a covid-free summer hamper ITV shares in the short-term?
- ITV EBITA drops 21%.
- ITV share price up over 100% year-on-year.
- Could investment in OTT content help ITV shares?
- Want to trade ITV shares? Open an account today
ITV (ITV.L) shares closed at 121.80p on 1 April. That’s slightly down from last week’s high of 128.45p but still more than 100% higher than it was on 30 March 2020. The recent dip comes in the wake of ITV publishing its full-year results. Although there were positives, the figures showed a slight dip in revenue for the TV network.
ITV revenue drops but will share price recovery continue?
Total external revenue was down 16% year-on-year to £2.7 billion. Broadcast revenue also dropped by 8%, while studio revenue took a 25% hit due to covid restrictions. This resulted in adjusted group EBITA falling by 21% to £573 million for the year. Although disappointing, the results were better than expected thanks, in part, to cost-savings totalling £116 million in Q4.
The impact of Covid-19 had caused the ITV share price to hit a five-year low in 2020. The initial impact of a nationwide lockdown in the UK saw its shares fall from 150p to 54.42p. However, there’s been a steady recovery since July. That’s prompted ITV executives to take a bullish tone in the company’s recent financial report. As well as noting last year’s restructuring efforts in line with Covid-19 regulations, executives are committed to commissioning more content for OTT platforms.
This desire to focus on OTT content stems from an 11% increase in video on demand (VOD) advertising revenue. Moreover, a report from Grand View Research predicts that the global video streaming market will be worth upwards of £160 billion by 2028. Netflix (NFLX.O) and Amazon (AMZN.O) will remain the major players in this space but ITV is making inroads into the market. Indeed, Snowpiercer, which was made for streaming platforms TNT and Netflix, has been recommissioned for a third series.
What’s really fuelling the bullish sentiment for ITV shares?
This increased focus on OTT content may be fuelling the bullish sentiment among analysts. Shore Capital (SGRS.L) and Berenberg Bank recently issued hold ratings, while Deutsch Bank (DBKGn.DE) has held a buy rating since 1 March. The willingness to embrace the latest viewing trends coincides with a return to normality.
Expectations are that programming will return to 90% capacity as the British government lifts more covid restrictions. The increased output should help stabilise revenue. However, the easing of restrictions could also have a negative impact as people head outside in the summer months. This may lead to short-term disruption for ITV shares.
Can ITV shares find new momentum?
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