Take advantage of ITV's post-Brexit slump, says Liberum

Liberum reiterated its stance on buy-rated broadcaster ITV as a ‘top pick’ on Monday, saying investors should take advantage of Friday’s share price slump.

It said that while ITV shares fell around 20% in the aftermath of the Brexit vote, nothing has changed in terms of the stock’s fundamentals, even if we assume an advertising decline of post-Lehman’s proportions.

In addition, the brokerage said the decline in sterling’s value could heighten the chances of a bid.

“The pound has fallen 10.5% against the US dollar - combined with the decline in ITV’s share price, this increases the chances of a bid by one of the major US media companies where there is historical and present interest in the UK market not only from the established media giants but also from new media/tech companies,” said Liberum.

As far as the fundamentals are concerned, Liberum said TV advertising is structurally doing well, more than holding up its share of total advertising, while evidence from the US from the TV upfront markets suggests high single-digit and low double-digit price increases for major broadcasters.

“Online advertising is also coming under increasing attack due to ad fraud / ad blocking issues, which should also help TV advertising,” it said, adding that ITV has around 45% of the UK TV advertising market.

At 1427 BST, ITV shares were down 9% to 158.70p.