Broker snap: Citi cuts ITV to 'sell'

27th Jan 2014 09:35

Citigroup has downgraded its rating for terrestrial broadcaster ITV from 'neutral' to 'sell', naming it as one of its least preferred stocks in the European media sector."For the past three years we have consistently argued that ITV has been on a positive trajectory in terms of quality," the bank said."Every metric we monitor or care about ? audience share, advertising share, margins, earnings per share, financial leverage, cash generation and cash returns ? has improved, and in some cases substantially."However, while Citi believes that prospects for ITV in 2014 remain good in light of an improved economic recovery, there are three key factors that have caused a more cautious view.The bank believes that the market is too optimistic that ITV can sustain growth and said that it is "overly sanguine" about the impact of sports rights losses in the coming years.The BBC Charter renewal and the potential sale of Channel 5 is another issue the bank is worried about: "we think the UK TV landscape could become more competitive rather than less, at least in the near-term".Lastly, ITV's valuation is already discounting the company's recent strong performance and 2014 prospects. The bank said the stock is trading at an enterprise value-to-sales ratio for 2014 of 3.5, compared with the long-term average multiple of just 2.0.The target price for the stock has been left unchanged at 191p.The stock was 1.6% lower at 191p by 09:46 on Monday.BC