Berenberg raises target price on ITV

Berenberg stated advertising was "much stronger than expected" despite the fact that it was already expected "a solid Q3" for ITV, given easy comparables and a desire by marketers to tap into elevated levels of consumer disposable income/savings.

The German bank highlighted that it while it had not originally anticipated any year-on-year growth in the fourth quarter, given that this was up 3% in 2020, the strong trend appears to have continued, with company guidance now suggesting that the year should finish with advertising up by 24%.

"With costs relatively fixed at this point in the year – it is too late to increase programming budgets – this incremental revenue will drop to the bottom line, and prompts a 16% increase in our EPS estimate for 2021. This has indeed been a very strong year for ITV," said the analysts.

However, while Berenberg pointed out that advertising had surprised positively, it added that it cannot help thinking that this was inconsistent with the decline in consumption of ITV content, leading it to reiterate its 'hold' rating on the stock.

"Advertising has a tendency to over-react on the upside, and downside, and we feel that 2022 could be a challenging year, with 2023 reflecting the impact of the HFSS product ban, and the lack of a major football tournament. ITV is cheap, but many of its peers are even cheaper."