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JPMorgan upgrades ITV as European broadcaster concerns 'overstated'

By Conor Coyle

Date: Tuesday 21 Nov 2017

JPMorgan upgrades ITV as European broadcaster concerns 'overstated'

(ShareCast News) - UK broadcaster ITV was boosted by an upgrade from investment bank JPMorgan Cazenove, which views the European sector as markedly undervalued by the market, with addressable-TV a development that "will transform TV" for advertisers.
Cazenove upped its recommendation on ITV to 'overweight' from 'neutral' but trimmed its 12-month target price to 185p from 204p, with ITV shares in November having fallen below 150p for the first time since 2013.

Cheap valuations, low expectations and overstated structural concerns were among the main reasons for analysts' positive view of the sector, also leading to upgrades for the likes of Spanish broadcaster Atresmedia and German company RTL, but with Germany's ProSiebenSat the top pick.

"The market has extrapolated from short term ad weakness to overstate structural concerns while it is overlooking new opportunities for growth," analyst Daniel Kerven said in a note on Tuesday.

While some analysts express concern that traditional broadcasters face difficulties in an increasingly digital market, Kerven asserted that ITV and others are capable of adjusting.

With viewing shifting from linear to 'time shifted' TV, online video and over-the-top (OTT), he said the impact is "mitigated by a vastly extended media day and TV continues to offer something unique to advertisers - enormous scale, fast reach, very high quality ad inventory and an attractive contextual environment for brand building".

Subscription video on demand (SVOD) and addressable TV are two new developments that analysts feel offer more potential than threats.

"Euro broadcasters have more to gain and less to lose than their US peers. SVOD competes for eyeballs but not ad revenues and drives lower pay-TV penetration and less fragmentation," Kervan said, noting that broadcasters can sell content into the global SVOD window, tap wholesale and retail distribution fees and offer targeted advertising.

Addressable TV "will transform TV for viewers and advertisers" as it offer the ability to deliver targeted ads to individual households, giving consumers more relevant ads and advertisers data-driven targeting and capped frequency.

"It will bring new local advertisers to TV and allow it to contest the larger and faster growing performance marketing opportunity - just one action per household per annum could double TV revenues."

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