FTSE 100

Where next for the ITV share price?

Is more volatility likely for the ITV share price (LON: ITV)?

The ITV share price (LON: ITV) has fallen by around 10% in the past three weeks. One reason for this could be the emergence of a new Covid-19 variant. Although the extent of its impact remains a known-unknown at the present time, the prospect of further containment measures appears to have dampened investor sentiment towards ITV.

The company struggled with tough operating conditions during previous lockdowns. They made the prospect of creating new content extremely challenging. They also contributed to a more uncertain economic outlook that prompted a number of firms to cut back on their TV advertising expenditure.

As such, further lockdown measures in response to the new Covid-19 variant could harm ITV’s financial future. This could mean that its short-term share price performance is highly dependent on the path taken by the pandemic over the coming months.

Longer term, ITV’s growth prospects could improve. Its latest trading update showed it is making encouraging progress in growing its digital business. Indeed, its online viewing figures increased by 39% in the first nine months of the current financial year. Alongside its rollout of a refreshed advertising platform, this contributed to growth in video on demand advertising of 54% over the same period.

In addition, the company’s Studios division is performing well. It is set to contribute to a strong programming slate for 2022, while major events such as the World Cup could make a positive impact on the firm’s financial performance. And, with ITV on track to deliver its previously announced £30m cost savings in the current financial year, its prospects appear to be relatively sound should operating conditions remain attractive.

Of course, the cyclical nature of the firm’s business means that a margin of safety is arguably of greater importance than with other FTSE 100 companies. ITV’s share price currently trades on a forward price-earnings ratio of around 9. This suggests that investors may have factored in more challenging trading conditions caused by the pandemic.

As a result, the company’s shares appear to offer good value for money on a long-term basis. Its cost-cutting measures, digital growth and upbeat outlook for 2022 programming could catalyse its stock price. However, in the short run, its shares could remain highly volatile and dependent on the economic impact of the ongoing pandemic.

ITV share price

The ITV share prices opened at 115.60 GBX on 20.01.22.

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.