NFLX is undervalued; slow engagement growth reflects strategic choices (live events) rather than weakness, with strong revenue growth across segments.

For example, Netflix has seen significant sales. The stock continues to decline. He said that Netflix is not growing as fast as he would like . This is the headline that Bloomberg is publishing everywhere.

It's a company that has appeared in my discounted cash flow analysis as undervalued again. In fact, it's the most undervalued company in my portfolio based on my internal analysis. It's Netflix.

We have a recent clip here. This clip is of Ted Sarandos, the CEO of Netflix, addressing some concerns about the company. He was first asked about the level of engagement. Ah, engagement is just another metric.

But at the time we said that , I think We were very naive in how we talked about engagement. I mean, in that world, all revenue is equal, all profits are equal, and all engagement is equal.

But not all engagement is equal. So , first and foremost, we're growing engagement. Ah, we're growing based on 200 billion hours of watch time. We grew by 2% in, you know, our last announcement. 2% isn't what people expect from you, is it ?

They're used to double- digit growth. At least certainly in revenue, and to some extent even in viewership, they were expecting more. That's my point about growth in general. Yes, in general, we're not growing as fast as I'd like us to. And we're working to make that move faster.

That last sentence I just said, that we're not growing as fast as we'd like, is the headline of many articles published today. That's the headline of the main article. But it also goes on to explain the specific factors behind this growth and how much of it is actually misleading.

We're also doing things that create a lot of hurdles to that number. I mean, when we do live shows on Netflix, which is relatively new, We spend about 5% of our content budget on live events.

And they generate about 1% of our watch time. So Netflix has chosen to deliberately harm its watch time, which is something most companies wouldn't do.

Now, they do a completely different job than I do . A lot of subscriptions. They're really effective for advertising. Subscriptions, subscriber retention , ads—all those things they do— but they create a barrier to engagement in how they invest against it.

Investors are worried about something that's actually a strength. Engagement shouldn't grow at the same rate as revenue. Because if revenue growth is constrained by engagement growth, then Netflix's total revenue is constrained by the number of hours watched.

Meaning, they'll have significant pricing constraints. People usually pay proportionally to the time they spend watching. But that's not how people pay for content. World Cup tickets sell for thousands of dollars for just an hour or an hour and a half of pure entertainment.

That's because it was a big, important event. And that's the essence of the content industry. People will pay a lot of money even for a short amount of time if that time is truly enjoyable .

Every single segment is growing by at least 10%. The company as a whole has grown cumulatively by 16%. That's not a bad sign when your company creates an engagement that people enjoy.

They're willing to pay more for it. They're growing globally in regions where they weren't previously significant . And in every region, they're growing by more than 10%. That's not a story of a struggling company. In fact, Netflix is doing very well.