The UK stock market rally has seen several FTSE 250 shares boosted over the last few months. The ITV (LSE:ITV) share price has been one of the benefactors of this rally, with the shares up over 94% in the last six months.
Over the last 12 months, the share price growth has been more modest for ITV, but the stock has still grown 18%.
With the broadcasting company releasing its full-year earnings report on Tuesday, I thought it a good time to evaluate whether now is a good time for me to add the shares to my portfolio.
Earnings report
Full-year pre-tax profits for 2020 declined 39% from the previous year to £325m. Revenue was also lower by 16% at £3.26bn as the company dealt with halted production for large periods of 2020 due to Covid 19 restrictions.
ITV said that advertising revenue was 11% lower, and indicated that the advertising environment remains a challenging one for the company.
However, a promising final quarter of the year helped full-year earnings to beat analyst expectations. ITV warned restrictions in the first quarter of 2021 would lead to declining profits again in Q1, but was optimistic about the relaxing of lockdown measures in the UK.
If all goes to plan with the roadmap announced by the UK government, I think ITV can benefit from more buoyant advertising budgets and will be able to increase content production.
Another reason for me to be bullish on ITV shares is the fact the business has shown an ability to pivot towards a more digital offering. With the expansion of the ITV Hub streaming service and its joint venture with the BBC in the shape of Britbox, I like that the company is diversifying its content offering. ITV now has more than 2.6m subscriptions to its online services worldwide.
Streaming competition
Despite reasons to be positive about the ITV share price, I think there’s still plenty of risk in buying the shares right now.
The company has to deal with a high level of competition, particularly on the digital side of things. Netflix, Amazon Prime, Disney+ and more are here to stay, and there’s always the possibility of further streaming services arriving to eat up market share even further.
I think the shares have suffered a lot due to this over the years. While the ITV share price is up in the last year, its shares are now trading 47% lower than they were five years ago.
Another risk that could weigh on the shares is any potential setback to the UK’s Covid vaccine rollout. Any significant delay could hamper production further for ITV Studios.
Despite these risks, I still see enough value in the ITV share price to buy in today. Its subscriptions and viewing hours continue to rise, and the company continues to innovate with its digital offering. This will be crucial in the years ahead and gives me confidence in the shares.