ITV Share Price Forecast for June 2021 – Time to Buy ITV Shares?

The price of ITV shares had been advancing quite positively since the company published its trading update covering the first quarter of 2021, with the management team reporting a pickup in advertising revenue while announcing that the ongoing restructuring of its Media and Entertainment division has been completed.

However, three sharp drops in the stock price this week have resulted in the potential reversal of this post-earnings uptrend, with the price of ITV shares sliding by almost 6% since hitting a post-pandemic peak of 134p per share.

With 40 more days to go until the firm reports its interim results for the first semester of 2021, could this trend line break mark the beginning of what could be a prolonged downtrend or is this just a temporary hiccup for this media stock?

Join me in the following ITV shares forecast as I take a closer look at the latest price action and the market’s current expectations for the firm.

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ITV shares – what are analysts saying?

A report published earlier this month by media research firm GroupM indicated that advertising revenue will grow 24% in the United Kingdom this year as a result of the country’s success in vaccinating most of its population.

Digital adverts will account for around 77% of the total while TV ads should grow by 13% compared to a year ago. The firm highlighted that, despite the obvious leadership of digital channels in terms of revenue, TV continues to play a “crucial role for large advertisers looking to achieve the mass reach and brand-building goals for which TV is uniquely effective”.

This is good news for ITV shares, as the company’s financials should benefit from this rebound in the advertising market. However, market participants appear to remain quite cautious about the firm’s outlook as the consensus 12-month ITV shares forecast is standing at 117.5p per share according to data from MarketBeat, which results in a 7% downside risk.

That said, the consensus revenue estimate for the year shows that the market is expecting revenues from the media firm to go back near pre-pandemic levels at £3.13 billion.

ITV shares – technical and fundamental analysis

ITV’s revenue growth had been quite stalled even before the pandemic stroked, with the company averaging an annual 2% to 3% jump in sales from 2016 to 2019 as cord-cutting and increased competition from streaming platforms have put a cap on the firm’s top-line performance.

That said, the company’s net profit margin has been solid at 14% or higher before the pandemic, with ITV producing around £473 million to shareholders back in 2019. Meanwhile, ITV’s balance sheet is fairly robust, with its net debt currently standing at around £600 million on total assets of £3.3 billion excluding cash.

Meanwhile, the firm has consistently produced free cash flows of £400 to £500 million in the past five years or so, including the year of the pandemic, which results in a price-to-free-cash-flow ratio of 10 for the company based on its current market capitalization of £4.5 billion excluding cash.

That multiple is quite conservative for a firm whose sales should land near where they were before the pandemic pretty soon, while the stock price is still trading 17% below its pre-pandemic closing high of 156.4p per share.

From the perspective of fundamental analysis, the business’ stalled growth is possibly its most disappointing aspect. However, profit margins and free cash flow generation capacity is solid and the valuation is not unattractive. If the management team finds a way to accelerate revenue growth, chances are that valuation multiples will be expanded as a result of an improved outlook.

Meanwhile, from a technical standpoint, the outlook for ITV shares is bearish as a result of the break of a rising wedge pattern – a typical bearish setup. For now, the stock is finding support at its 50-day moving average of 125.5p per share.

However, a break below this level could result in a pronounced drop toward the 120p level first and then to the next support area at 115p for a 5% downside risk.

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