UBS upgrades ITV after 18% share price drop

UBS upgraded broadcaster ITV to ‘neutral’ from ‘sell’ following an 18% share price fall, despite macroeconomic uncertainty and operational headwinds, noting that fundamental downside was limited.

The bank said its economists have cut their 2016 UK GDP growth forecast to 1.3% and to 0.5% for 2017.

“We would expect political and economic uncertainty to weigh on TV ad spend from the third quarter of 2016; although the magnitude of this is difficult to predict and will depend on media mix, deflation, ad loads and sector weights.”

UBS’s new forecasts see ITV's TV net advertising revenue fall 1.5% in full-year 2016 from +1%, -5% in FY17 from +1%, before recovering +5% in FY18 and FY19.

The bank cut its FY16-18 earnings per share estimates by 6-19%. Its adjusted earnings per share estimate for FY17 is 13.9p versus consensus of 18.4p before the UK referendum. UBS cut its price target on ITV to 170p from 195p.

At 1015 BST, ITV shares were up 2.9% to 191.90p.