The ITV share price fell 6% yesterday. Should I buy shares now?

Yesterday, the FTSE 100 took a significant move lower by almost 2.5%. It broke through the 7,000 point barrier last Friday and currently trades at 6,860. With this move, it has pulled some individual stocks lower, including the ITV (LSE:ITV) share price. Yesterday it fell over 6%, although it has seen a small bounce today. Is this a dip worth buying, or should I stay away?

The longer-term trend

The ITV share price began the month just shy of 130p, and now trades at 115p. This slump is a bit disappointing, but the longer-term trend is still positive. Over one year, the share price is up 69%. 

I think this broader trend higher accurately reflects the state of the company. The pandemic did negatively impact the company, but it has shown that there are some great parts of the business.

For example, ITV Studios revenues was down 25% last year due to the disruptions surrounding production. At the same time, online streaming service BritBox UK was ahead of plan with subscriptions. BritBox US subscriptions grew by 50%.

This isn’t too surprising, as people during lockdown increased TV watching, particularly on services such as BritBox. The hit to ITV Studios, along with a dip in advertising, meant that overall revenue and profit fell for 2020.

I think the ITV share price performed well during this period as investors could see that the hit to production and advertising is temporary, but the growth in streaming services like BritBox can continue even without lockdowns. In fact, in the recent trading update, the CEO noted a rebound in advertising revenue already.

A short blip for the ITV share price?

In the short run, the ITV share price has taken a hit. I think this is mostly due to investors’ concerns about rising Covid-19 cases in the UK, along with virus variants around the world. For example, ITV recently broadcasted the Euro 2020 football tournament. If we see a rise in cases, such similar sporting events could be cancelled or postponed. This would impact viewing figures, and advertising revenue could slump.

Further, ITV Studios could suffer more disruption to productions. We’ve already seen the negative drag this provided to results last year. So if this was to arise again, it could hamper full-year 2021 results. 

Ultimately, the concern that was supposed to be alleviated by freedom day in the UK seems to have backfired for the ITV share price. It’s impossible to predict the future of the virus, and whether we will continue to struggle with it going forward. However, I don’t see it as being serious enough to stop production or hit advertising revenues in the same way as the initial lockdown did for ITV. 

On that basis, I would be happy to buy the dip in ITV shares around current levels. There is a lot of potential room to move back higher to levels seen last year around the 140p-150p region, which is where my initial target is.