ITV (LSE:ITV) is now one of the most liquid stocks in the FTSE 250 index, but it is firmly out of the senior FTSE 100 index. Since its demotion a few weeks ago, shares in ITV have continued to slide. We have argued previously on this site that ITV is in an evolve or die situation. In an era when analysts and investors are losing the love for Netflix and Disney+, ITV will need to come up with something special to remain relevant.
ITV shares are being hammered – down 46% over the 12 month period, and now off a staggering 62% over five years. While the stock had managed to claw its way back from a pandemic low to around the 130p level last year, it has been downhill ever since. We ran the numbers through the AI engine at Deshe Analytics in Tel Aviv to see if machine learning could throw up any lights at the end of the tunnel for ITV investors.
Insights from artificial intelligence on ITV stock
Personally I love running stocks through massive data processing engines as they can deliver insights human analysts cannot. In this case we can also get some informative comparative grades for ITV shares against competitors in the UK market.
There’s some good news and some bad news here. First the good news.
ITV shares are looking cheap, with a PE ratio of 6.1x vs 8.1x at last filing date. This is not surprising given the stock has literally halved in price since the great demotion and the exit of all that index fund money. We saw heavy and automatic selling on the back of that event and really a new level for the stock which it is showing no danger of breaking out of. The technicals are pointing to some fairly rangebound behaviour as the market waits on news from ITV management. Even some heavy buying volume on 17 June failed to shift the stock by much.
Despite their liquidity ITV shares are being hammered.
Are #ITV shares out of the FTSE-100 for good now?
Read more: https://t.co/YNV1VituBw
— The Armchair Trader (@armchairtweets) June 27, 2022
Overall the company looks in relatively good health given its fundamentals. Return on equity and net cash flow are down however, as is the free cash flow, for which it should also be marked down. Deshe is scoring ITV a mere 45% for free cashflow which probably contributes more towards its Hold rating from the AI than anything else in the ITV numbers right now.
Technical analysis and cash flow working against ITV
When run against peers in the same sector, ITV’s cashflow looks less than impressive – it should be rating at least a 70%, but it’s struggling to hold 65%.The decline in equity and loss of really any momentum is also flagged up. ITV’s stock is now priced below its 5-day, 50-day, and 200-day moving average, while its MACD (moving average convergence divergence) indicates that the stock’s price movement momentum is weakening. Historically, this is a negative setup in the near, medium, and long-term. The company is trading near it’s 12-month low, which signals it is struggling to keep above its support price. Meanwhile, looking at the Stochastic Oscillator and RSI (relative strength index), ITV’s stock indicates that it’s likely oversold.
Obviously the AI does not understand the stock has been removed from an index, an action that in itself has reinforced negativity around the ITV share price.
The metrics suggest that despite its cheap PE rating ITV is not a buy at the moment, while Berenberg downgraded ITV to “Sell” back in April and Barclays, JPMorgan, Goldman Sachs and Credit Suisse all cut their target price in March. You might want to hold ITV shares for the dividend price, but to answer our own question we anticipate the share has further to fall. ITV will have its work cut out to get back into the FTSE 100, and to be honest, we can’t see this ship being turned around.
