Why I think the ITV share price is only getting started

The ITV (LSE: ITV) share price has pretty much doubled over the last six months, which is good news for my own portfolio. Today, I’ll briefly summarise why I think there could be even more upside ahead. I’ll also touch on a bargain small-cap stock whose value should rise in tandem with the FTSE 250 broadcasting giant.

ITV share price: reasons to be bullish 

Perhaps the biggest reason for me to remain bullish on ITV is that revenue should rebound over the rest of 2021. Encouragingly, this month’s full-year report included mention of “more positive trends in the advertising market in March and April“. Most of its programmes are also back in production. 

Should all go as planned, I can see ITV restarting dividends. This should be a further catalyst for the shares to keep climbing as income investors pile back in. Additional gains could come from the company re-entering the FTSE 100 only a few months after being forced out. Funds tracking the index will be forced to buy the stock whether they like it or not.  

Another opportunity?

ITV isn’t the only value play out there. Industry peer STV Group (LSE: STVG) could also benefit from an ongoing reversal in sentiment. The shares are already up nearly 70% since the end of August. 

Earlier this month, the small-cap said it had achieved a “better than expected” performance in 2020, even though revenue and pre-tax profits were significantly down on the year. On a more positive note, it said online viewing rose 68% over the period. In other news, STV Studios won a record 19 new commissions in 2020 and net debt, excluding lease liabilities, fell 53% to £17.5m. In addition to all this, its also confirmed that it would reinstate dividends.

The most important snippet for me, however, was that advertising trends were “improving materially” in 2021.

Reasons to be cautious

Although bullish on the ITV share price and STVG’s prospects for the rest of 2021, I’m conscious that owning shares in the former may be skewing my opinion. So, let’s look at a few arguments for why things might not go as I think.

One clear objection to continuing to hold either stock now is that people can’t wait to leave their sofas and venture back out. As such, viewing numbers could drop over the remainder of 2021, especially if we get decent summer weather.

Of course, a third wave of the coronavirus would be bad news too and may halt productions again. A related concern comes from the possibility that overseas travel may still be prohibited. If so, travel companies and airlines will be unwilling to spend on advertising. 

On top of this, the competition for viewers won’t get any easier for ITV. Yes, its Britbox service has been well received, but the number of subscriptions pales in comparison to US giants like Netflix and Disney. As mentioned last month, I’m a big fan of the latter.

Solid hold

I’m happy to continue holding my ITV shares. A forecast P/E ratio of 12 takes into account the above concerns, in my view. Meanwhile, STV trades on an even more attractive valuation of 10.5 times projected FY21 earnings. I’d buy with any spare cash.

As long as COVID-19 is eventually sent packing, I’m hopeful investors like me will be rewarded for not selling either too soon.