Granada shares fell 6.23% before pulling back to trade down 5.21%, or 4.5p, at 75.5p. Merrill Lynch cut its price target to 150p from 165p and cut its 2003 pre-tax profits target to £153m from £182m.
The bank noted that, while the ITV network was beating its advertising growth forecasts for 2002, it expected December advertising to be down 5%. ITV looks set to have beat the 4.8% advertising target for October and it looks likely that it will hit 6%.
As a result of December's predicted drop, Merrill Lynch has reduced its 2003 ITV advertising growth forecast from 4% to 0.5%.
In a note, the bank said: "However, we now expect December to be 5% down, and the reduction in viewership/impacts in 2002 will only be fully reflected in the negotiations for the new year, carried out in November/December."
Earlier this week, the £320m advertising deal ITV signed with Unilever was been given the green light by the Independent Television Commission, following an investigation over fears that Carlton Communications and Granada had illegally colluded.
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