Numis downgrades ITV from 'buy' to 'add'

13th Feb 2015 10:39

Numis Securities has lowered its recommendation for broadcaster ITV from 'buy' to 'add' ahead of the company's annual results on 4 March, saying it sees less upside after a recent run in the shares.The broker, which kept its 260p target price for the stock, noted that the shares have risen by 11% over the last three months, which it labelled a "strong relative performance".ITV had said in November in its third-quarter update that full-year advertising revenues would be up "around +5%",Numis expects ITV to report a pre-tax profit of £675m for the 2014 financial year, compared with £581m in 2013.However, looking ahead, while Numis expects further profit growth it said there are a "number of moving parts" which make 2015 advertising "hard to call at this stage". These include the upcoming UK election, tough World Cup comparatives with last year and this year's Rugby World Cup benefit.The broker currently forecasts just a 1% improvement in advertising revenues but sees upside to +3% on the back of a solid macroeconomic backdrop."The group continues to make good progress across its digital and production businesses and we believe the management team is executing well on and off-screen."We have yet to be convinced by the arguments for retransmission fees while the cyclicality of a free-to-air broadcaster would make a takeover by a leveraged trade buyer (such as Liberty) or private equity challenging in our view."ITV's shares were up just 0.1% at 231.14p by 11:30 on Friday.