Than expected guidance investors reasaurd by better than expected earnings per share as well as better than expected International Subscriber growth in the quarter netflix adding 6. 3 million International Subscribers. Above projection while u. S. Subscriber growth did fall short of expectations. But investors may also be reassured by ceo reed hayesings giving frank comments in the letter to shareholders with competition. This of course comes ahead of disney plus and apple tv plus launching next month hayesings saying theyve been preparing for this new wave of competition for a long time, writing quote the launch of new services will be noisy, maybe modest headantened near term growth we have tried to factor that into guidance. In the longterm we expect to continue to grow nicely given strength of service in the large Market Opportunity now the other bright spot that hayesings is stretsing in the letter to shareholders is International Growth hayesings saying they are expanded nonenglish language original ofrpgs because they grow penetration in the international markets. He says they have globally released 100 seasons of local language original series with plans for over 130 more next year alone he also says theyre on track to achieve fullyear operating margin of 13 and next year targeting another 300 points in operating Margin Expansion of course, well have to see what else hayesings says in the netflix video call starting in an hour. Melissa, back to you. Julia, thank you. Julia boorstin in los angeles with the netflix details lets go to steve. You literally bought netflix minutes before it released earnings. Minutes before the closing bell. Minutes before they came out and reported earnings. I new it was going to be bin ar, either up 20 or down 20 and instantly down 20 i thought it was losing trade but i figured it would reverse either which im holding the position i saw 302 and 318 as resistance. Im probably out much it tomorrow if it holds the gains which is a big if with netflix. Right. Bon owin was on. Maiden voyage on the options action. I dont know if you were watching he did a fantastic job but he talked about the move of this magnitude we said it a while i get a lot wrong we did this right. We said netflix given a couple months ago probably trading down 252. If it holds there you buy with both hands thats what happened and last night we said to the upside based on the move youre going to potentially see 317 thats exactly where it traded up to. So 50 retracement of the may high of the recent low, 3717, this was a god quarter i understand that u. S. Is saturated. The International Growth is great. We start reading between the lines, guidance not fantastic. I think in my opinion, you absolutely have to take the money and run now. You characterize a launch of the various streaming service as modest headwinds, as it being noisy. I was talk a analyst today saying it its not the fourth calendar quarter where there is the you have toughest competition. I want the first and second quarters next year where people get the serviced and decide what they do. Until they get traction how long does it take to get disney plus out there youll have a bunch of big subscriptions at the beginning, right. Theyll both do apple, big pushes, were not going to have a sense. There was a lot to like about the quarter primarily that expectations were low going in that was sort of interesting i mean, for me, i just too expensive cant be long it, competition coming i know pete has been long it a long time. What do you do, sell on this now. I keep selling calls again the the position i have to roll the calls again ive been doing that a while the focus at least by the reaction right now is the focus that should be there which is international. Right. I look at the 60 plus million they have u. S. Right now or north america. I dont know how much more they can get from that. But if the international continues to grow which it has been and thats been the outperformer for them we are focusing on the right thing. In reed hayesings talked about may some shortterm headwinds, obviously with the launches of everybody else but they have a good head start. And looking at the International Head start and all the languages. He talked about 100 plus language they put out there. I think india is the key right now. And if the day ever comes theyre able to get into china that could be something very, very interesting as well. How about the key though of how they fund the new content . So thats going to be a question, do they continue to raise prices is it. Can they raise prices can they raise prices. In the face of apple at 5 and disneyland around that level im Holding Netflix the stock maybe but the streaming service ill probably own disney and ill probably own apple. I dont know. The streaming services not the stocks. Exactly by the way i own two out of tleet. I dont own disney i will own the streaming services. Right. But how many other people can afford to pay for three or four of them. I just look at that content that they put up i say oh my god thats hugely expensive. Talking about all the local content i think, wow, okay, we are in for a massive continual spend. Its not like they are spending to build and thats it you built the content. The business for netflix than say disney which nay be building off stable of content that appeals to people around the world. Right. This is the cash burn again once again back to the cash burn. That story is there the whole time. Except for the competition changed. The competition changed thats the reason why i think the stock went down to two we mentioned last night last quarter the first time in a while seemed like reed hayesings was concerned about the coming competition. And he never been before at least in my recollection in terms of prior Conference Calls he actually seemed concern flushed a lot of people out. Now thats out there that move to 252 got everybody out. Now what you see is everybody piling back in i think this is an opportunity and pete can speak to the options again to take money off the table. S in a textbook 50 retracement of the spring high. Before pete gets in on options, the level that guy is talking about, the 252 is 20 above the december fall off a cliff 2018 level where netflix traded down to that was an unrealistic level, 231. When you test lower levels you get more bullish process its all about positioning opinion the trade i made today was about the fact the stock was down 30 or over 30 from july. It was all about positioning tor me. The last quarter was waufl. 25 , 30 whatever to the downside and obviously everybody seemed to be ratcheting down either price targets or whatever. And rg was negative going in so the positive was when they had the International Numbers strong, that seems to be what everybody is reading right now. Sigh of relief. Yeah, sigh of relief theyre there and treading water and how much longer . I think a few more quarters. Because it will take time for the competition to get after them i wouldnt say this is a huge longterm hold for me. But ive done okay with this thing selling calls every month the last year and a half or so i think ill continue to do so. Sounds like the trade is volatile the next two, three, four quarter zblos or four hours. Literally. We got that video call that worried video call where they take questions that are preselected or whatnot. We have a much different conversation tomorrow at this time no question. But again, this is one of the stocks you have to trade the stock dont let the stock trade you. To trade it now is taking money off the table whats been a significant move over the last four quarters. You cant be married to this stock. When you look at the valuation, the pe alone you cant be married to it. You have to trade aggressively or shouldnt be in it. For more vex lets bring in luke vent yurps founder and fast money friend gene munster what can did you make of the quarter. I thought it was positive relevant it active to expectation. But the move in the after market masked the underlying cautious trend we have seen in the business i think your recap has largely covered this but i want to emphasize in piece, is that ultimately for this to work they need Margin Expansion and continue to grow subs and were entering a multiquarter of really uncertainty. I also when we think about the guidance and relative to the uncertainty and some of the comments they had to help investors frame in december. Its important context that historically this has been a company thats given guidance and exceeded the subguidance in the june quarter they missed by 47 and then they took this more conservative view on september. And they missed that by 3 the concept that this now 20 decline in their guidance for december is a safe number, i think that that is is unknown at this point. And i think, mel, you hit it on the head too its not about the deasy but ultimate lip what happens in march. And so i think that this was positive to expectations but this is still a story that i think would be difficult to own. It is still 140 billion market cap here this is compared to disney at 240 billion. This is still a big market cap relative to whats going on in the underlying business. What levers do they have to pull to expand margins at this point, gene . I was surprised at the i dont know the answer to that. I was surprised at the commentary that they are going to expect Margin Expansion for nextier, the 300 basis points. I dont know how you get there because the easiest way to get there is through price increases which is now off the table i think that that is a hard off the table. And you continue to need to fund this with quit aggressively the one opportunity is if they can get cheap debt they have 12 billion in debt now and continue to fund content with that, there may be an opportunity to have some sort of tradeoff there where they can get margins in entire. But thats the core question how do you compete in a more operate expanding margins in what is a very different competitive environment than we had a year ago gene, when you look at apple and google im sorry when you look at apple and disney, they have other sources of revenue to fund their content duration and whatever else they are looking to do. When you look at netflix, they are a onetrick pony a can netflix compete against that and b does anyone buy netflix with in valuation just to do a plug and play . Or is it it that ship sailed. I think on the acquisition side the ship has sailed especially what we are talk bag. You can imagine conversations in the board room looking at recent pullback of netflix over the last six months and think of the opportunity there. Theyre asking the same questions about the next year. The business could be valued very differently a year from now. In terms of the Business Model and theyre making money on their unique content where disney has other avenues and apple does too i think thats a critical point to the story what that really means is that the those other players, apple and disney can sustain lower prices longer, essentially can freeze out some of the netflix price increases. Now, if any decide to move higher, disney and apple on pricing that may leave some oxygen for netflix but i see that as unlikely over the next year. Lets flip the script, gene, could netflix be wanting to buy some sort of you library of content itself would it be able to do that. They could. I think at their debt load right now it would be unlikely i want to be clear too is netflix goinged to be around in five years. Theyll have subscribers it shouldnt be 130 billion market cap in my analysis i think that avenues to advance what theyre doing through content in some sort of acquisition would be modest compared to et competitively whats going on. What should it be then . If not 130 in market cap what should it be . Its for the investors to decide but i its a 45 multiple on next year. I think a more reasonable multiple would be 25 multiple. Wow. I think maybe that seems reasonable. All right 20 terms lower. Grade it, gene, the quarter. Ill give it a c plus. Ooh you know, the the stock reaction would suggest a higher grade. But ultimately this trend is there is some Cautionary Tales here and so i would stick with a c plus. All right gene, great to see you thank you. Thank you. Gene munster of luke veterans c plus for a lowquality hop in the after hours. Im so happy i wasnt in professor munsters class thp thats crushing. But a c plus is a good grade from him really. I would agree steve talks about positioning. Its been about about positioning because if it came in trading 325 wed been talk bag at different story right now. Got people off sides Fourth Quarter revenue guidance below the street domesticed adds half what the street was looking for oh the Fourth QuarterInternational Adds a million less than the street was looking for. Believe what theyre telling you. Next quarter not great process if they tell that you this is the great opportunity to take profits. And it should be a good quarter for them actually. Thats supposed to be one of the strongest parts of the year the Fourth Quarter and then the competition accelerates after that injury genes c plus makes sense. The outlook wasnt very good i look at netflix, a trading stock. I look at disney as a hold stock. I own disney owned it a long time. And apple. And hold it wint. Apple as well. I wonder who gene things who is the most competitive knocking netflix out . I think there is somebody out there. The existential of all of them. All of them. What if they dont knock netflix out but curb growth . Its priced for growth. Right. They curb that growth what multiple. I would answer my own question with disney is the reason ai say. The first time somebody agreed with you. Once in a while anyway. The reality when you look at disney is and what they put out and the content they have which actually goes to the area we want really when you look at where youre looking, outside of there, the younger children, all of that that capturing below the 25yearold type crowd, thats what they want. Disney has that. And i think thats why disney is a threat. Gmt and United Auto Workers reaching a tentative dole to end the strike we tell what you it means for gm one top strategist says cracks are appearing in the consumer. He explains why in could signal trouble for the pitkat we are live from times square, new york city, much refa ne rhtfter this. Whether your beauty routine is 3 steps. Or 57, make natures bounty hair skin and nails step one. Its the number one brand uniquely formulated for silky hair, glowing skin and healthy nails. Natures bounty, because youre better off healthy. The lexus es. Every curve, every innovation, every feeling. A product of mastery. Lease the 2019 es 350 for 379 month for 36 months. Experience amazing at your lexus dealer. Hey. Hey. You must be stevens phone. Now you can take control of your home wifi and get a notification the instant someone new joins your network. Only with xfinity xfi. Download the xfi app today. Welcome back to fast money. Big developments between General Motors and the United Auto Workers lets get the details. We have a proposed tentative agreement, a tentative agreement if uaw leaders from around the country meeting in detroit tomorrow the vote that they accept this and then they pass it on to the rank and file who may take up to two weeks to vote theres a little bit of something in this for both sides 50 50. For the uaw they caseyed the temporary worker concerns they have there is a pathway to permanent jobs for those workers that was a concern for the uaw theyre keeping one of the Assembly Plants that has been idled and was scheduled to be shut down by General Motors, the plant in detroit it will build an electric vehicle. Lordstown, the two other plants, dont expect those to stick around and finally there are no models moving from mexico thats what General Motors said all along. It was not planning to do. The uaw says we want some production up here its not happening what has been the strike impact of a this strike that has gone on more than 30 days . By one estimate the cost to gm at least 2 billion. All of the u. S. Production has been stopped for 31 days and much of the production in canada and mexico greatly reduced over the last several weeks. Mainly because the suppliers havent been able to ship parts to the plants. As a result theyve had to shut down production. As you look at shares of General Motors over the last month you might be looking at this and saying well shouldnt there be more of a pop back here . This is basically what people expected a little bit of a pop today but not back to levels we saw a month ago. Remember the workers stay on strike, melissa, until the leadership says, yeah, go back to work while we vote on whether or not to ratify this deal, or stay on strike while a potential vote on ratifying the contract one last note look at suppliers, all moved up subsectionly between 3 and 6 . Mainly because there is an expect aches that this deal will get finalized and they can once again start shipping parts out to gm factories when they start running. Let me get it straight, phil. They can nouns a deal but until are the fiee two ratify cakes. Two radmann ratifications you need the leadership. The clock is ticking. Correct you need the leadership to say we think its a deal. Right. And then to say, either stay on the picket lines or go back to work to the rank and file my gut says from talking with people, theyre likely going to say go back to work. Its tough to tell people while we vote on this the next couple weeks stay on the picket lines not impossible it could happen. But generally speaking when i talk with people most expect you see the workers if the leadership agrees to the deal that theyre saying go back to work while everybody votes. Karen has a question. Whats the president for the leadership saying, okay we grow we have a deal here but then ultimately it not getting the larger vote. It has happened happened with Fiat Chrysler four years ago. The leadership from the local union from around the country four years ago looked at the deal that was initially agreed to by the negotiators and fiat cries remember and said, are you nuts we dont like this. They went back to negotiating table. Three or fou