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He ITV (LSE: ITV) share price soared on November 25, when rumors circulated about a possible takeover bid.
Rumors place private equity firm CVC Capital Partners as one of the main potential bidders. A major European broadcaster, believed to be French group TF1, is also on the list of suspects. As are All3Media, owned by RedBird Capital, and Mediawan, backed by KKR.
Is there anyone who is not preparing a purchase?
Undervalued stocks
None of the possible approaches seems to have gone far so far. But if competitive offers appear in the coming months, the share price could rise.
The effect of rumors must be taken in context. The price increase only returns ITV shares to where they were before the November 7 third-quarter update.
We saw a 20% drop in revenue at ITV Studios, affected by the American writers and actors strike. The board still says the company is on track for record fiscal year profits. Digital advertising revenue increased 15%.
What does the City Council think?
The forecasts will mean nothing if you buy ITV. But as they stand, they paint an optimistic picture. Analysts are generally bullish on the stock, with a fairly healthy “buy” rating.
Earnings are expected to remain roughly the same through 2026, and the dividend is expected to increase only modestly between 2023 and 2026.
But even based on that fairly static outlook, we'd see ITV stock with price-to-earnings (P/E) multiples of between 8.5 and 10 in the coming years. Expected dividends suggest returns of 6.8% to 7% on the current share price.
Those potential bidders aren't the only ones who see the stock as a good value. ITV itself has been on a share buyback spree for much of the year.
The next 12 months
Analysts have an average price target on the stock of 88p over the next 12 months, up 20% from today. And the most bullish see a potential gain of 55%.
I'm only interested in ITV for its long-term value. But with so much attention on the company now, the next few months could prove crucial. And that could depend on where the board's outlook for 2025 goes at the end of the current year.
We have to wait until March 6 for fiscal year results, but the third quarter gave us some clues.
ITV Perspectives
Until now the board waits “ITV Studios to achieve record adjusted EBITA, with margin within our target range of 13-15%“. This even with a mid-single-digit revenue drop due to the strikes, which should still mean “Total organic revenue growth of 5% on average annually from 2021 to 2026.“.
In the Media and Entertainment division, the crystal ball shows that total advertising revenue increased by 2.5%, with ITV “on track to generate at least £750 million in digital revenue by 2026“.
Should investors consider buying ITV now? If I do, I will base it on long-term value and not hopes for short-term acquisition gains.
