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Taking the time to change money is difficult. I ITV (LSE: ITV) share price is a good example. The television group is making good progress with its plan to become a global content producer and the UK's leading streaming service.
But ITV shares are still around 30% lower than at the start of 2022, just before CEO Carolyn McCall set out her plans.
Why are investors not singing on ITV?
ITV is really improving. Revenue from its ITV Studios content business – which sells to broadcasters and other programs – rose from £1,760m in 2021 to £2,170m in 2023.
The company's digital broadcast service, ITVX, is also growing. Digital advertising revenue has risen from £293m in 2021 to £415m last year.
The only problem is that the television advertising business is not doing so well. Broadcast television advertising sales fell from £1,664m in 2021 to £1,363m in 2023. Admittedly, last year there was a terrible decline in advertising. McCall said it was the worst decline since 2009.
He is confident that things will improve, but the broader market is still uncertain. Many investors believe that ITV is still heavily dependent on so-called linear television.
I think they are wrong
ITV's strategy looks reasonable to me. And I'm very excited about the group's growth in the US content market. To me, that looks like a huge long-term growth opportunity.
Back home, ITV continues to expand its streaming services, capturing users who don't want to watch traditional cable TV. The company says it is on target for digital revenue to reach £750m by 2026. I see no reason to doubt this.
The business is always profitable as well. ITV's operating margin is around 14%. Adjusted earnings are expected to rise by around 18% to 9.2p in 2024.
The share price is hovering around 78p, as I write. These forecasts price ITV shares at eight times earnings, with a well-supported yield of 6%.
I think that is very cheap in this business. City analysts have a target price estimate of around 95p for ITV. My calculations suggest a fair price somewhere between 90p and 120p.
As a shareholder, I hope that if ITV continues to deliver its programs for the rest of this year, the shares will reward my patience.
Will 2024 be a turning point?
Markets hate uncertainty. Institutional investors can be wary of companies that are making changes.
But in my experience, success is usually rewarded in the end. If ITV can sustain its advertising profits this year and deliver a confident outlook for 2025, then I think the cheap value on offer here could prove irresistible to investors.
Obviously, I don't know what ITV's share price will be at the end of this year. No one can predict short-term stock price movements. However, I think there are good reasons to be optimistic about the outlook for ITV shares for the rest of the year.
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