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One potential growth option being explored is ITV (LSE:ITV), a company traditionally known for its broadcasting dominance in the UK. At first glance, it may not seem like a typical growth stock, but there are key factors that position it as a candidate for future growth.
ITV holds a special place in British television history, having provided iconic programming for generations. As the largest commercial broadcaster in the UK, its legacy is undeniable. However, despite this popularity, the company has faced challenges in recent years. ITV’s share price has risen by 9% over the past 12 months, moving from 71p to 78p. Yet, this increase doesn’t reflect the broader struggles traditional broadcasters like ITV have faced.
A major issue for ITV has been the digital shift. The rise of on-demand streaming services like Netflix, Amazon Prime, and Apple TV has significantly altered consumer habits. Audiences now expect to access content whenever and wherever they want, which has put traditional broadcasters under pressure. This shift has impacted ITV’s viewership and, subsequently, its earnings potential.
Another challenge lies in advertising revenue, which is a key source of income for the broadcaster. Economic instability often prompts businesses to cut advertising budgets, which has hurt ITV in recent years. Advertising spending is typically one of the first areas to be reduced during uncertain times, but a more stable economic environment could see advertising spending rebound, potentially benefiting the broadcaster's financial performance.
Looking to the future, one area of potential growth for ITV is its streaming service, ITVX. Significant investments have been made to develop this platform, aimed at aligning the company with modern viewing habits. In the first half of the year, streaming hours on ITVX rose by 15%, showing early signs of success.
ITV’s production arm, ITV Studios, is another promising aspect of the business. The studio has delivered popular programs like I’m a Celebrity and Love Island, while also producing content for other platforms. This division not only generates strong content for ITV but also contributes to its earnings by supplying programming to global networks.
In terms of valuation, ITV trades at a price-to-earnings ratio of around eight, suggesting the shares are attractively priced. Additionally, with a dividend yield exceeding 6%, the company offers a solid opportunity for income generation, though it’s important to remember that dividends are never guaranteed.
