Netflix Pullback Is an Opportunity, Ross Gerber Says

Heading into these results. You know, you made the point that the market needs some clarity of their direction. Netflix is still the king here, but you know, the market and investors looking for some direction. As for what's next, we know that Netflix is toeing into live sports. Do you think that they're doing enough? Well, yes and no. Like they certainly have made a lot of progress with live sports, with some, you know, positive results and some negative results. I don't think that they want to or it makes sense for them to spend, you know, tens of billions of dollars buying sports rights. ESPN has already done that. So I like their approach to sports because they're trying to measure the cost to the return. But, you know, we're kind of getting sort of random sports on on Netflix. But we will be getting more NFL games in the future. But I don't see that as sort of the end all be all for them because it costs so much for sports rights. Mhm. Well what do you think that end all be all is I mean as you say in your notes still the king here. Uh, you do own Netflix in your fund, but what do you think they should be really focusing on at this point as you have these swirling concerns, especially around engagement and increasing competition. Well, as you saw with the, you know, attempt to buy Warner Brothers in this whole thing of consolidating streamers like the streamer business has reached sort of its max in that we have enough streamers, we have plenty of content, there's lots of competition. So, you know, not to Netflix this fall, but there was, you know, a lot of competition this, this quarter for them for these viewing hours. There was a lot of choices that and people, you know will follow the the World Cup or the Winter Olympics or they're going to, you know, watch what they're going to watch. Um, and right now HBO has a really good lineup, for example. And that might change, you know, and it kind of goes back and forth. So so what's the future for Netflix? And they really made a commitment to video games and live entertainment. And I think it makes the most sense for them to continue into these two paths. You know, video games is a wonderful business, that they can monetize their IP this way, and then live entertainment is really where they haven't been, which I think is a huge missed opportunity getting these movies into theaters, putting these shows in theaters and generating revenue from the theaters. In my estimation, that Netflix can make billions of dollars a year just in the movie theaters, if they threw a few of these movies out there and nobody cares if they have to wait 2 or 3 weeks to get the movie on the streamer. Yeah, you know, it's not that big of a deal. I think it actually helps build anticipation for those titles on, you know, on the streamer once it gets out of theaters. So I think that's the next thing you know, it's live entertainment, it's sports and it's video games. But on the theater side too, I mean, it's gets some leadership questions to roster strategy questions. I should say, too. I mean, it seems like they've been a little reticent to embrace that idea. I mean, there was a lot of talk about, uh, K-pop demon hunters and how quickly they pulled that from theaters, despite the fact that everybody wanted to seem to want to see it in theaters and be part of that experience. And it seemed like it's just they kind of missed the mark. You know, sometimes you have to read the room and realize that you have something there. Just run with it. Forget, you know, I mean, I don't know what their internal metrics are like when it comes to like, oh, what do we need to get on the streaming platform first relative to the theaters? But do you do you have confidence that the management has the ability to pivot when they do sort of tap into something that clearly, uh, has grabbed everyone's attention. I mean, we're an attention economy, right? And this is why I was buying stock recently in the low 70s is because I very much believe Ted Sandra is is sort of the genius of Hollywood right now. And and, you know, they have the best management around. So so I'm sure they get what they need to be doing. It's just a difficult time to make these kind of moves. Right now. Hollywood has so many crosscurrents going on. And so Netflix, after just going through this whole battle for Warner Brothers, which I was glad they lost, um, they have the capital, they can do things, and they're very measured with their strategic focus. So I think that's all good. But when you look at the stock down here, you know, let's say at 70 box, you know, you're paying less than 20 times forward for for Netflix. Netflix isn't going anywhere. And I, I have to, you know, reiterate this. We're going to be watching Netflix. Our kids are going to be watching Netflix. So for investors this is a wonderful opportunity. Whenever there's uncertainty over Netflix's future, they always seem to figure this out. And and we value the company substantially higher than the current price today. So so any pullback here on earnings we think is an opportunity because these are very durable. Good earnings reports with lots of cash flow. They buy back their stock. They're very shareholder friendly company. Well yeah. And I don't want to dispute that. And I don't mean to be glib but I mean we had two on last quarter and the stock was under pressure. And you were like, you know, don't count this out. The stock will be back. It's three months later. It's still down is down in the after hours trading. Um, you know, the buy back, you know, I guess, you know, provided a little bit of a floor, but not much going forward as you value this stock. Ross and I mean, we I get the wrong not that I go through her decks and she's valuing this up against, you know, Warner Brothers and Disney etc.. I guess my question is that the right way to value Netflix, should you be valuing this more? I know it's hard to get visibility into YouTube and, and on some of these other things that are under the umbrella of larger companies like alphabet. But is that where we need to start looking at the valuation comparisons? No, I mean, valuations should be relevant to your track record as a company. It's certainly which industry you're in matters. So when you look at a company like Warner Brothers or Disney and you look at revenue and earnings growth, well there is none. So that, you know, that's a totally different story than Netflix, which has had consistent, incredible earnings growth for a very long time. You know, I've owned the stock for a long time. And. And so you're talking about a company that just you know, they beat on earnings. Let's let's be real. It wasn't like a bad earnings report by any means. The fact that they're not blowing it out right now I get it. And and I do think they need to articulate like where are they going to really grow. They said they're going to grow their business, you know, substantially over the next five years or so. What's the strategy? And that's I think they need to articulate more clear. But you know, from an investment perspective whether the stock's the same price as it was three months ago or not, it isn't relevant to me. I'm a buyer of these securities. But where the stock will be in five years is what's relevant to me. And so I think if you're an investor, this is a great opportunity. When there is uncertainty, when people don't believe in Netflix and you're willing to get 120 multiple for forward earnings when people are paying ridiculous multiples for all kinds of stocks. So, you know, we own brand name companies that aren't going away. It's almost like a Warren Buffett pick at this point, at this valuation, he added. Google maybe late. Maybe he's going to look at Netflix now.