Why the ITV share price looks set to move higher

Close to 85p, in ITV (LSE: ITV) share price below 10 years ago. But the business has a global reach and plans to grow. And I think the weakness of the new stock seems unfair.

A decade ago, ITV moved higher driven by good performance in business. And in the summer of 2015, the price tripled.

Well executed

Of course, stock history does not guarantee that positive results will repeat. Indeed, it is about 25% lower than last year. And that can be worrying. However, I expect the current weakness in earnings to be nothing more than a short-term challenge of volatile costs.

After all, the integrated producer broadcaster has done well. For example, in January the company said that the launch of its new streaming service, ITVX, had been a success. And there was a 55% year-over-year increase in streaming views and a 65% increase in online users from December 8, 2022 to January 7.

Chief executive Carolyn McCall said the soccer World Cup was “important” driver. However, excluding footy, basic views via streaming during the month were up 29% year-on-year. And many new viewers come from “hard to reach” the audience. They have been attracted by “Strong slate of launch titles commissioned exclusively for ITVX”.

That’s important, McCall added “ITVX has also landed well with advertisers who see the added value of the scale and audience reach they can now target.” And for me, the implication is that a new service that looks like it will generate higher profits and profits.

Multiple streams of revenue

But ITVX is not the only part of the business that has improved. The company’s ITV Studios division is one of the world’s largest global creators, producers and distributors. And more than 55% of the revenue comes from outside the UK.

Then there is the Global format and ITV’s distribution business which focuses on sales and “exploitation” from the global unscripted format. And it also generates revenue from licensing the company’s brands for games, live events and merchandise.

In addition, the Media & Entertainment operation is home to the ITV family of channels and platforms. And according to the company “the largest family of free-to-air commercial channels in the UK”. Indeed, ITVX is one part of that division.

However, one thing that worries investors about the business is the cycle. There is a fair reliance on advertising revenue and it is vulnerable to fluctuations in the wider economy. But it actually has several revenue streams. In addition to advertising, it earns revenue from commercial partnerships, subscriptions, original productions, distribution and from licensing HD channels and streaming services.

My feeling is that business income may be stronger than many think. And directors encourage growth. For example, the company’s vision for 2026 is “A leader in UK streaming and a global force in developing content”.

There is no certainty that the company will be able to achieve its ambitions profitably. And I can even lose money in stocks by investing now. But, if I had the money, ITV would be teasing me today.