RE: ITV’s valuation case (Updated!)23 Jun 2024 15:01
If you look at ITV Studios through the prism of future profits over the next 12-18 months and a return to previously generated levels of revenue from the US market and not marked by the impact of last year's strikes - then assuming a minimal dynamics of their growth, it should be assumed that the calculated value of 85 pence in relation to 4 billion shares (i.e. not taking into account the buyback) increases by 20 to 40% in a stable market environment. However, assuming the growing dominance of ITV in this field, but also the demand generated for content by ITVX, you can safely increase the range of valuation of ITV Studios itself at the end of 2025 by a range of 40 to 60% higher than the one presented, and taking into account the decrease in the number of ITV shares by only 5%, we are talking about a valuation of £1.2 to £1.5 per ITV share. According to the valuations I have come across, ITVX is currently worth £300-380 million, and taking into account average forecasts from £350-450 million. In my opinion, this is a very conservative valuation, because it only realistically estimates the costs of creating such a platform. However, leaving aside my feelings, if we add the rest of the ITV business, as a modest £100 million, this will give us a valuation of ITV shares in the range of £1.35 to £1.65. It should be emphasized that a well-functioning business, dominating the market with a high return on capital, is always valued in the long term with a large premium reaching several dozen percent. Here I recommend looking at valuations on the US market. And this valuation does not take this into account. So unless we are in for a cataclysm, I think my forecasts from the beginning of this year, assuming an ITV share valuation of £1.2 to £1.5 at the end of 2024, and in the £2.0-£3.0 range at the end of 2025 (of course taking into account the factors I mentioned earlier), are much more than likely.