Is it worth investing in X right now? What to buy, sell or avoid

When ITV, the broadcaster and programme-maker, announced half-year results in July, it may have expected a more positive response from the stock market than it received. Every measure of profit, from pre-tax to earnings per share, was comfortably ahead of the same period last year and the outlook was optimistic for the rest of 2024. Yet the shares toppled from a year’s high of 84p to 77p and have been subdued since. In December 2019 they were 152p.
At the least, this suggests a hefty dollop of caution among investors, especially considering the prospect of close to 10p a share adjusted earnings for this year and maybe a 6p dividend. Those numbers would signal a 7.7 p/e ratio and a 7.8 per cent yield. Such returns are rarely scorned without reason.
The first is total revenue which, unlike the half-year profits, fell from £1.96 billion to £1.9 billion. Unusually, this has been explained away as little more than a technicality, a few projects being contracted as executive productions rather than co-productions, meaning that they clocked up less revenue.
“It’s really just about the ebb and flow of dealmaking, and every deal is different,” Julian Bellamy, managing director of ITV Studios, said. “We are winning the same business, we are making the same shows, we are making the same profit. It’s just the accounting treatment.”
Fine, but that sows doubts about the validity of gross income, the foundation of the numbers analysts and would-be shareholders rely on. It would be one thing if the changes had merely shaved a bit off a healthy increase, but a different matter when it turns a positive into a negative.
Studios is regarded as the group’s rock-solid anchor, making programmes for publishers around the world. It is the largest UK content producer and one of the largest unscripted US producers, backed by a 90,000-hour library. It is in the top three in most of the foreign markets in which it operates and sells to Netflix and other streaming rivals. So it can do without the bean-counters tinkering with the numbers.
The bigger problem, as the company acknowledges, is that its fortunes are seen as tied to the wider UK economy, and therefore to the advertising that flows into its domestic broadcasting and streaming businesses.
Entertainment shows such as Love Island, The 1% Club and Dancing on Ice have developed millions of loyal followers, which advertisers relish. More expensive, but still profitable, are big sporting events, including football’s Euros and Uefa Nations League. But the UK’s flat GDP is unhelpful and many would-be advertisers are putting off decisions until after the budget on October 30.
Broadcast programmes are increasingly being used as gateways to the bigger prize: streaming, because people are increasingly creating their own nightly schedules. A major success can have a halo effect: although the celebrated Mr Bates vs the Post Office did not itself make any meaningful money for ITV, 93 per cent of its ITVX audience clicked on other programmes. But viewers are fickle, especially when it is so easy to switch to BBC iPlayer, Netflix, Amazon, Disney+ and the Channel 4 and 5 offerings.
In the past six years ITV’s content revenue has grown by a compound 5 per cent a year, against a 4 per cent industry average. ITV appears wedded to its business model but a worry for everyone is how to tempt the under-40s, and the advertising dollars they generate, away from YouTube, Tik Tok and Instagram.
Citi Research, which bemoans the reaction to the latest half-year results as harsh, predict that ITV’s pre-tax profits will rise from last year’s £396 million to £506 million for 2025. But beware firms where the intangible assets, in this case mainly contracts, rights and franchises, amount to half the market cap.
At the company’s annual meeting in May, a shareholder said the management had lost the stock market’s confidence and should seek a takeover. As he pointed out, Amazon could buy ITV out of petty cash. The chair, Andrew Cosslett, told him to console himself with the fat dividend yield.
Advice Hold
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