Will ITV shares weather the storm? What to expect from trading statement

ITV has come under pressure as advertisers cut back, while the shares remain well down on earlier in the year despite an impressive bounce from the lows.

Why is ITV under pressure?

ITV’s first-quarter (Q1) statement should provide a glimpse into a group whose business is under severe pressure.

Filming has been cut back or stopped entirely, and ad revenue will have been hit as well, having been declining before the crisis began. One point of light has been a rise in ‘library sales’ to other broadcasters, who are in need of new content to fill their schedules as viewing of ‘traditional’ television rises sharply.

ITV’s position as a cash-generative business also helps matters – a strong return on capital of over 20% for 2019 points towards a business that has a strong foundation in place. Unlike some companies such as retail, where revenues have all but dried up, ITV’s is ‘only’ falling, giving it an advantage and making it more attractive for investors.

ITV shares: technical analysis

ITV found a base around 49p in mid-March, after selling off with the broader market. This low provided support for an eventual lift-off in April, which saw the shares gain 70%, reaching 80p and briefly moving above the 50-day simple moving average (SMA).

For now that bounce has come to an end, with the price surrendering gains from the last days of April and dropping below trendline support. Now the 65p area comes into play, having been an area of resistance in late March and then support in mid-April. A move below this brings the 49p area back into play.

Alternatively, the price needs to recover 76p to provide a more bullish view, with a push above 82p creating a new higher high.

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