ITV Stock Affected by Brexit Fears, DWA Deal a "Positive" for It, Says Analyst

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"ITV's content strategy positions the company uniquely as proliferation of distribution platforms and convergence of the media space plays out," says Jefferies' Lisa Hau.

The stock of U.K. TV giant ITV has been affected by investors' fears of a possible "Brexit," an exit of the U.K. from the European Union, Jefferies analyst Lisa Hau said in a report on Tuesday.

But she said NBCUniversal's $3.8 billion deal for the acquisition of DreamWorks Animation provides a positive read-across for ITV by highlighting the value of content and ITV's continued push into content production. She maintained her "buy" rating on the stock.

Ahead of Britain's June 23 referendum on its future in the EU, Hau said "recent Brexit concerns [have been] an overhang on the stock," citing how ITV shares have underperformed the broad-based FTSE 100 index by about 18 percent year-to-date. "The core broadcast division is under pressure as sentiment is weak around the delay or cancelation of advertising budgets," she said.

But Hau also said: "We feel that this is impacting confidence rather than the reality." In line with that, she continues to forecast flat advertising revenue in the first quarter as guided by the company, followed by about 6 percent growth in the second quarter.

About NBCUniversal's Dreamworks Animation deal, Hau said it "shows the value of content," explaining: "While this is not directly comparable to [ITV's growing content production arm] ITV Studios, it provides a positive read-across."

She summarized: "ITV's content strategy positions the company uniquely as proliferation of distribution platforms and convergence of the media space plays out." With ITV Studios representing about 30 percent of group revenue and expected to deliver double-digit revenue and profit growth in 2016, she also highlighted that continued diversification into content "reduces volatility from advertising revenues."

Concluded Hau: "ITV's next phase of growth is content focused."

ITV's stock as of 11:10 a.m. London time was up 1.4 percent at $3.35 (£2.28). Hau has a price target of $4.55 (£3.10) on the stock.

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