ITV tumbles on BofA Merrill Lynch downgrade

ITV was under pressure on Thursday as Bank of America Merrill Lynch cut its stance on the stock to 'underperform' from 'buy' and slashed the price target to 110p from 210p as it turned more cautious on the European media sector.

Merrill highlighted a decline in TV ad trends. It noted that following three consecutive years of more than 5% growth, the UK TV ad market slowed down to 1% growth in 2016, dropped 2% in 2017 and will end up flat in 2018. The bank expects the TV ad market to drop by 2-3% in 2019/20.

Beyond Brexit-related uncertainty, Merrill reckons the market is mostly hit by online video disruption. It pointed to the launch of Netflix in January 2012, two to three years earlier than in other European countries.

In addition, it said the UK is the European country where TV consumption is falling at the fastest rate, in particular among young adults.

"ITV’s on screen performance has been very strong in 2018 with audience share up 180 basis points to 23.3%. However, given the discussed fall in TV viewing, ITV absolute viewing (in hours/minutes) itself is just stable.

"Similarly to other broadcasters, ITV is suffering from rapid aging in its viewer base. In 2018, viewing on adults aged 15-24 declined 15% for example, despite the success of Love Island."

At 1045 GMT, the shares were down 7.4% to 127.06p.