Oakmark Funds chief investment officer Bill Nygren said Tuesday that he still believes in Netflix despite a disappointing first-quarter report that sparked a massive sell-off in the stock. Shares of the streaming giant dropped more than 25% in extended trading after Netflix disclosed a surprise loss of subscribers — the first such decline in a decade. The company said that it now expects those losses to be even worse in the current quarter. Despite the sharp decline, Nygren said on " Closing Bell: Overtime " on Tuesday that the long-term bull case for Netflix is still intact. "Clearly it's a disappointing number from Netflix, and some decline in the stock is to be expected following that kind of quarterly release. But I think you have to maintain long-term perspectives ... and our thesis remains that five years from now this will be a bigger company, serving more subscribers, earning a higher profit margin than it does today," Nygren said. Nygren said that Netflix is trading below the amount AT & T paid for HBO on a per subscriber basis in its 2018 acquisition of Time Warner. "We have a hard time understanding why a Netflix sub is worth half of what an HBO sub was worth," Nygren said. If subscriber growth at Netflix has slowed more permanently, the company should look at raising prices further to grow revenue, Nygren said. Netflix's steep decline shaved more than $40 billion off the value of the company, which is the entire market value of companies such as Walgreens or HP . Nygren has made his mark as a value investor over more than two decades as a portfolio manager at Oakmark. His current holdings are tilted toward large cap technology and financials. At the end of the March, 4.5% of the Oakmark Select Fund was in Netflix, according to the firm's website. Entering Tuesday, the fund was down more than 7% year to date. The firm's flagship Oakmark Fund had a 1.9% weight in Netflix.
Oakmark Funds chief investment officer Bill Nygren said Tuesday that he still believes in Netflix despite a disappointing first-quarter report that sparked a massive sell-off in the stock.