One of the most well-known companies on the FTSE 250 is ITV (LSE: ITV). Since launching in 1955, the broadcaster has become a key player in UK television entertainment.
But July was far from plain sailing for the firm. And the release of its half-year results on 25 July sent its share price tumbling by 5%. It’s yet to stage a recovery, falling a further 0.6%. But could this be a smart time for investors to consider snapping up some shares?
An overreaction?
Despite taking a hit, the stock has still put up a strong performance in 2024. During the year, it has climbed 28.3%. It’s up 11.7% over the last 12 months. That said, it has lost 28.4% of its value over the last five years.
Its latest hitch, in my opinion, sparked an overreaction from the market. Granted, not all aspects of the results were positive. For example, group revenue fell 2% while ITV Studios revenue dropped 13%. However, it wasn’t all bad.
To start, the business pinned the weak Studios performance down to the 2023 US writers’ and actors’ strikes. It claims this will delay around £80m of revenue in 2024 and 2025. What’s more, adjusted earnings before interest, tax, and amortisation rose 40% while earnings per share climbed 43% to 3.3p.
Passive income
There’s another reason why I’m a fan of ITV shares. It’s because the stock has a healthy 6.2% dividend yield. To go with that, management has laid out its intention to keep rewarding shareholders going forward.
Last year, after selling BritBox for £235m, it announced the entire net proceeds would go towards share buybacks. As of 30 June, it had purchased £53m worth of shares.
Digital capabilities
ITV has faced immense pressure in recent times from a couple of different sources. The decline of traditional broadcasting has posed a big threat to its operation. Raging inflation hasn’t helped with that either, as it has forced ITV’s customers to cut back on spending.
In tandem with that, there has also been the rise of streaming providers such as Netflix and Amazon Prime. This has altered the media landscape and produced fresh competition for the likes of ITV.
But the business has been fighting back. And it’s doing a decent job so far. It continues to make solid progress with ITVX, its digital streaming platform. For the first half, digital advertising revenues were up 17%.
Time to pounce?
Despite gaining momentum this year, I still think the ITV share price has room for growth and is a stock that investors should consider buying. After its dip, I’d pounce on the chance to snap up some more shares today if I had the cash.
The stock trades on a price-to-earnings ratio of 15.8, below the average of its peers. And looking ahead to the next few years, I’m bullish on ITV.
We may experience some further share price fluctuations. The second half of the year, as well as 2025, will be impacted due to what has played out in the first half.
But with it still on track to achieve its 2026 targets, including at least £750m in digital revenues, I think the long-term outlook is a positive one.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in ITV. The Motley Fool UK has recommended Amazon and ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
