Broker snap: ITV upgraded after ad boost

14th Oct 2009 11:55

Broker Nomura Securities reckons an unexpected improvement in the advertising market should offset the setbacks broadcaster ITV has suffered recently.Nomura has upgraded the stock from 'reduce' to 'neutral' and bumped up its price target to 55p from 40p.The broker notes that the probable retention of contract rights renewal 'against all expectations' and the company's problems in securing people for the chairman and chief executive roles have been negatives for the company but 'the most important driver for a broadcaster, advertising, has swung in ITV's favour.' 'This is against both our expectations and runs contrary to the recent expectations of most media buyers,' Nomura's Matthew Walker said. The broker has responded to the late surge in advertising placements by upgrading its advertising income forecasts for ITV.'Our ITV family advertising forecasts move to -11% for 2009 from -13.3% and to -1% from -2% in 2011. If advertising has been reset, then H1 [first half] 2011 could potentially be up,' Walker suggests.Expectations of advertising revenue declines moderating has led to Nomura forecasting a 49% boost to earnings per share (EPS) in 2010 and a 20% rise in EPS in 2011. On this basis, the price/earnings ratio of ITV 'moves from a premium to other broadcasters in 2010 to a discount in 2011 and this makes it difficult to maintain a Reduce rating,' the broker said.Nomura's upgrade follows Goldman Sachs's decision to upgrade ITV from 'neutral' to 'buy' at the beginning of the week.