ITV shares slide after Piers Morgan quits morning show, weak earnings

LONDON, ENGLAND – MARCH 10: Piers Morgan seen leaving his West London home to take his daughter Elise to school

Photo by MWE/GC Images

ITV shares slid 3.8% Wednesday following the resignation of high-profile presenter Piers Morgan over comments he made about Meghan, the Duchess of Sussex, and her bombshell interview with Oprah Winfrey.

The British broadcaster confirmed Morgan’s departure in a statement on Tuesday, hours after he stormed off the set of the “Good Morning Britain” show, which has been drawing record market share this month, following criticism of his remarks.

Tuesday’s show drew more than 41,000 complaints to the U.K.’s television regulator Ofcom, which has since confirmed that it is investigating the comments. Morgan accused Meghan of lying about having suicidal depression and being denied help during her time as a member of the royal family.

ITV also on Tuesday reported a 33.5% fall in operating profit for 2020 and a sharp drop in ad revenues, with analysts noting concerns that an accelerated shift to streaming services was making life difficult for broadcasters reliant on traditional television advertising.

Roddy Davidson, media analyst at Shore Capital who covers the stock, told CNBC Wednesday that Morgan’s departure may be playing a part in the continued decline for the company’s shares, but suggested Tuesday’s earnings were still the main driver of share price movement, along with potential profit-taking by investors after a strong final six months of the year.

“Good Morning Britain is an important part of the daytime schedule, and Piers Morgan is a bit of a marmite character, but he is pretty watchable for that, whether you agree or disagree with him,” Davidson said.

“I thought the disappointing aspect of yesterday’s results was the fact that they didn’t pay a final dividend. The debt has substantially reduced, the company is in strong shape financially, it is cash generative, and the comments were certainly more positive with regard to the advertising revenue line bouncing back as Covid restrictions are lifted.”

Davidson said the lack of a dividend payment was a “missed opportunity” to reward shareholders after a turbulent 12 months, in which the cancellation of major shows such as “Love Island” and the acceleration of viewers transitioning to streaming services weighed on ITV’s viewership.

Russ Mould, investment director at stockbroking platform AJ Bell, also noted that while the Morgan controversy may have an immediate impact, investors should remain focused on the fundamentals.

“I’m sure that that program is a big advertising spinner for them, because it’s incredibly well-watched. He certainly seems to have been important to that program’s success and it will be intriguing to see how it continues without him,” Mould told CNBC on Wednesday.

However, he suggested that the company’s stiff competition in the streaming market and tough ad environment, along with takeover speculation, would remain the key drivers of share price activity.

“If you’re bullish on the stock, you’re looking for an economic upturn, you’re looking for an advertising upturn, and you’re looking for somebody maybe to buy it for its very rich content library,” he said.

“The bear cases are a tough economic environment, stacks of competition and a model that is potentially being severely challenged over time.”

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