There are signs that the resurgence of commercial TV’s advertising may be much weaker than anticipated. A report from analysts at investment bank Morgan Stanley says that while the media sector continues to outperform, and the bank continues to rate Media as ‘attractive’, European advertising is looking most likely to be squeezed. “Southern Europe, particularly Italy and Spain have already been weak in Q1 and there are signs of a sharp slowdown in Germany going into Q2. France has seen a good Q1 in broadcast advertising but faces increasingly tough comps as the year progresses. There is a similar situation at ITV,” says the report.

“We stay buyers of ITV (shares), now the lowest rated of the broadcasters where our 3 per cent ad growth forecast in 2011 looks feasible given +10 per cent after four months,” they add, citing “the new management impetus, the improved balance sheet and the prospect of the rollback of regulatory headwinds as we approach the 2012 analogue switch off.”

“Mediaset and Telecinco have been suffering from weak underlying trends throughout Q1. In both Italy and Spain, January started broadly inline with expectations (+6 per cent in Spain, +4 per cent for Mediaset) before adspend shrank in February (+5 per cent in Spain, flat for Mediaset) and even turned negative in March (-5 per cent in Spain, Mediaset down low single-digit). Mediaset is hopeful that adspend would pick up in H2, but visibility remains low. In Spain Telecinco’s Cuatro appears to be facing a sharp drop in advertiser support,” the report continues.

Morgan Stanley’s Top ’overwight’ stocks include satellite operators Eutelsat and SES, plus ITV, Sky Deutschland and agency giant WPP.

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