Ongoing Digitization And Local Content Will Expand Media Audiences

Key Takeaways

• TF1+ is poised for strong digital revenue and margin growth, driven by rising user engagement, successful monetization strategies, and premium content partnerships.
  
• Market leadership in localized French content and advanced ad technology positions TF1 to sustain long-term growth amid rising industry competition and shifting advertiser demand.
  
• Reliance on linear TV and domestic ad revenue leaves TF1 vulnerable to digital disruption, rising competition, and limited international diversification.

Catalysts

Engages in the broadcasting, studios and entertainment, and digital businesses in France and internationally.

• While analyst consensus expects strong TF1+ advertising revenue growth, the platform's monthly streamer base is accelerating even faster, with engagement and ad load both rising; this positions TF1+ to potentially achieve exponential revenue growth and digital margin expansion significantly above current market forecasts.
  
• Analysts broadly agree TF1+ could become a premium alternative to YouTube in French-speaking markets, but the new Netflix partnership massively increases TF1's international content reach and discoverability, opening up high-value advertising and potential carriage revenues, creating upside for both revenue and earnings beyond current expectations.
  
• The upcoming introduction of micro payments and in-app purchases on TF1+-modeled after successful mobile gaming monetization-will generate highly incremental, recurring revenue streams at minimal marginal cost, with management estimating a fivefold increase in digital revenue-per-hour viewed, driving significant net margin and EPS upside.
  
• TF1's unique market leadership in localized, original French content and proven ability to monetize premium IP (including international studio productions and hit series) creates a long-run advantage to capitalize on rising European demand for tailored programming, helping sustain revenue and margin growth even as industry competition intensifies.
  
• The shift of advertising budgets toward connected TV and data-driven digital video, combined with TF1's heavy investment in addressable ad technology, will enable the group to capture growing premium ad rates, lifting both revenue and long-term EBITDA margins as advertisers seek quality, measurable reach at scale.

TF1 Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on TF1 compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming TF1's revenue will grow by 3.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.0% today to 10.4% in 3 years time.
• The bullish analysts expect earnings to reach €269.0 million (and earnings per share of €1.29) by about September 2028, up from €187.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.9x on those 2028 earnings, up from 10.0x today. This future PE is greater than the current PE for the GB Media industry at 11.5x.
• Analysts expect the number of shares outstanding to decline by 1.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.14%, as per the Simply Wall St company report.

TF1 Future Earnings Per Share Growth

Risks

• The ongoing structural decline in linear television viewership, particularly among younger demographics who increasingly favor digital and on-demand streaming platforms, poses a risk to TF1's core audience, potentially leading to decreasing long-term advertising revenues and weaker overall market presence.
  
• TF1 remains heavily reliant on advertising as its primary revenue stream, with linear ad revenue down 2.5 percent year-on-year and the segment expected to face continued low single-digit declines, raising concerns about the sustainability of revenue growth and possible future stagnation or decline.
  
• Escalating competition from global streaming giants such as Netflix, YouTube, and Amazon Prime, combined with the rising costs of acquiring quality content and sports rights, increases pressure on TF1's margins and could reduce net earnings if content investment fails to drive commensurate revenue growth.
  
• Despite digital advertising revenues growing strongly, the effectiveness of digital ads is threatened by wider adoption of ad-blocking technology and privacy tools, which may undermine TF1's ability to monetize new digital audiences and erode future digital revenue streams.
  
• TF1's international expansion remains limited, with nascent efforts in French-speaking Africa currently producing insignificant monetized revenues, thereby exposing the company to risks of domestic market volatility and reducing opportunities for longer-term diversified earnings growth.

Valuation

• The assumed bullish price target for TF1 is €13.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of TF1's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €13.5, and the most bearish reporting a price target of just €7.9.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €2.6 billion, earnings will come to €269.0 million, and it would be trading on a PE ratio of 11.9x, assuming you use a discount rate of 6.1%.
• Given the current share price of €8.92, the bullish analyst price target of €13.5 is 33.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.