Netflix shares are down 54% from their highs even though third-quarter revenue rose 12% year over year to $12.9 billion and operating margin hit a record 34.6%. The author argues the real problem is viewing time: Netflix reported no growth in watch hours in the quarter, and its U.S. TV viewing share has been roughly flat for about two years while YouTube's has grown significantly. To counter this, Netflix is shifting toward sports, live events, podcasts, talk shows and shorter series, while competing with YouTube, Instagram and TikTok for attention. The author believes the company can recover if it competes more effectively, and says the stock looks cheap at a P/E of 18 if revenue keeps growing in double digits.
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