Just might pay off big time. We start with an earnings load on netflix, moving sharply lower in the afterhours session down by more than 10 . Netflix plummeting after it reported a miss on the bottom line in fact, its biggest earnings miss in 16 years netflix also giving far lower than expected guidance for the Third Quarter subscriber editions, forecasting the edition of 2. 5 million new subscribers in the Third Quarter, less than half the number analysts anticipated. As expected, growth is slowing as consumers get through the initial shock of covid and social restrictions. Now the chief content officer has been appointed coceo and is joining netflixs board of directors, saying in terms of the day to day running of netflix, i do not expect much to change our key executive Leadership Groups are unchanged think of teds well deserved promotion formalizing how we already run the Business Today when the call starts in an hour, well be listening for more on the impact of competition, name checking ticktock and mentioning the launches of peacock and hbo max and netflixs potential ability to raise prices in the u. S. And other more developed markets and also expand its lower cost options in emerging markets. It is this key notion of pulling forward demand that is really getting to netflix in the after hours session. That had been the concern of a lot of the netflix bears out there. Yeah. They get rewarded for it today obviously. I will remain bullish on netflix. I understand why if youre bearish, it absolutely gives you ammunition weve seen similar before in terms of Stock Performance the miss was concerning that in terms of the aggregate, netflix has basically done in a half a year what it did in the entirety of last year for a myriad of Different Reasons. Youve got to find a level to buy it back. This is where we were trading at the first of this month. Weve seen these levels clearly before i think the 440 level makes sense for a number of Different Reasons. Steve would probably agree to a seven point. Thats the 50 retracement of that march low which is spot on the screws of 300 and the recent high of 575. So for a lot of reasons, i think, again, youre looking for reasons to buy netflix on this selloff rather than be empowered by it if youre playing it from the short side. Steve grasso, down 30 bucks from here, is that a point to get in as guy said ill go with the 50day moving average or thereabouts. Lets call it 450. I think sarah nailed it. Its about value versus growth if this is any indication of how were going to pay up for growth in this environment where theres not earnings, then you have to take a back pedal. Maybe its time to reverse or rotate into some value value has only outperformed probably 17 days from may to june other than that, this has been a growth ball game i expect that the last couple of days, i should say the first couple days of this week where you saw that rotation probably is not going to be that longlived guys point to buy this on a dip, i think you could make a case to say 440 as guy said, 450 as i said or maybe even 430 if youre aggressive. Whats the big deal about pulling forward subscribers . Whats the difference between signing up subscribers now versus next quarter . Isnt it the same argument one can make with apple iphone demand when its pulled forward . Overall in the span of two quarters, if youre still getting the same number effectively, does it make a difference well, it makes a difference if, in fact, netflix was highly resilient through the early part of the crisis. Amazon and walmart were a handful of stocks that were a place for capital and a place to be defensive and seen in the first few days in being the haves in the covid world of haves and have nots. This stock has been on a tear. Even on the pullback here, the stock did roughly 35 in nine trading sessions going into this number this is easily a rest and something that was welldeserved. The subs for q3 this is a terrible number. This is a very competitive environment. When i look at disney plus and how quickly they built those subs over 50 million and you look at saturation in the United States and netflix has to be an international story. Internationally they just got done, all the numbers that hit the tape talked about the Different Reasons and some of the complications in the current environment. International is not going to be growing as fast as possible. For a company that burns cash and im often pointing that out, they lost a billion and a half last year, theyre not making money on a Free Cash Flow basis. Theyll be cash flow neutral in 2020 is that because expenses have come down because production is well down . Probably its not even a gralass half ful on a bad number. Im not going to say i told you so today as much as i believe in the value rotation we have seen over the last four days, liquidity is going into mega cap tech stocks. I said last week when this stock was moving over 500, i dont want to be in the way of Something Like netflix in that environment. I dont think that environment has changed it does seem at least in the after hours essential this is a netflix specific issue its not pulling down the other mega cap tech stocks except for maybe amazon but that also falls into this growth at any price sort of category of stock that has risen with the facebooks and googles of the world. Right i think of it as different than the other fangs, sort of its own unique business, its own unique earnings in that there really arent very much of any. But its really an outstanding company. To me, it comes down to valuation. Tim talked about cash flow he was right about why the cash flow is where it is right now. I think they could actually get to after production starts they do tend to guide conservatively maybe i dont know if people are going to take down their numbers a lot on this or not one thing i actually found very interesting just from a Corporate Citizen is that they are going to, people who havent used their subscription for two years, theyre going to turn it off and not bill them. Last quarter they said theyd notify them. Now theyre going to turn it off so those people dont pay, which is a very nice Corporate Citizen thing to do. Not that it will move the needle at all thats sort of interesting to me yeah. Comes down to valuation 200 points ago i couldnt get on board, so i cant now. Lets get more on netflixs quarter and bring in gene mon munster. What was the big headline for you . I think this concept of a Great Company but not necessarily a great stock. Its a ton of value netflix is creating for users we looked at the cost per hour of using netflix, 37 cents compared to cable tv at 1. 20 compared to reading a book at 7. 11. You wonder why people dont read books. The key takeaway here is its a fantastic company. I also have been cautious on this even with the pullback, 70 billion in market cap this year. Ive been long on this i do believe we are crossing over a point with this guidance that the big takeaway is essentially we need to fast forward and think about 2021 growth as you said earlier, melissa, theyve been pulling forward subs theyve effectively cross what had the original street estimate was for net sub adds for 2020. Investors are largely not going to be as concerns if subs are down 50 in the september quarter, might be down 20 again in december. But really start to focus on what is the net sub adds once weve anniversaried all this our belief, when you step back is the distinction between a Great Company, which netflix is and i dont believe theyll be a great stock over the next year i think when you step pack abacd think about that growth in the next year and put it up against other companies delivering a lot of value per hour, apple and amazon with their streaming services, ticktock, peacock, all of this, i think its going to be difficult for netflix to be raising prices. I could be wrong but if they are unable to raise prices, i look to the multiple to compress. Isnt there a benefit to netflix achieving greater scale sooner doesnt greater scale mean more market share, meaning putting more pressure on competitors the flywheel in the case of netflix has been financed through debt they now have about 16 billion in debt, a detail that is often overlooked they have about 7 billion in cash this is a unique Large Tech Company that is net cash negative i think about that flywheel ultimately i believe its about great content. Great content in the context of the consumer i dont necessarily put ticktock content in the order of content, but nonetheless it grabs peoples attention this flywheel we talk about, i think in the case of netflix it is funded through debt and separately i think that consumers appetite is fleeting when it comes to content again, i think netflix is going to be around a long time, but i dont think those type of businesses should garner 100 x multiplied come back and think about a name i still feel is greatly underappreciated which is apple trading in the low 20s multiple with netflix at 100. You said 37 cents an hour for a netflix user for entertainment versus like 7 plus for a book correct. Wow thats a huge differential gene, always enlightening. Gene munster guy, i think people dont read books because theyre lazier these days in general. Thats my own opinion. I love reading. Are you kidding me im a book guy for sure. I can imagine. But im 73 years old. The argument also is as people stay at home and binge more theyve gone through a lot of content i know tims watched tiger king eight times in a row hes now looking for more content. They will have to spend more to replenish that content for all of those demanding viewers yeah. No question. Listen, i understand, i totally get the bear case without question but i think you would acknowledge the same arguments were making now in terms of spending more, we could have made those arguments a few years ago and obviously a lot lower in terms of the stock price to genes point, at a certain point its going to catch up with them, i guess i dont think were there yet. Im going to do a selfwould you rather i said netflix and ill say it again. I dont know where disney is in the after hours but my sense is its probably lower which i think speaks volumes i think disney might go lower on this netflix move lower. I think netflix is the beta play. Disney is down. 08 also a downgrade predicting the park revenue wont return to precovid levels until 2025, which is quite some time again tim, i dont know if you want to participate in the selfwould you rather shenanigans. Yeah. Go ahead. Weve established that i follow the rules on the show and im not initiating selfwould you rathers like steve and guy, but im really happy to have these guys try to pull disney and doisney plus into a netflix valuation. Disney shareholders love that. You cant tell me disney is going to suffer on the downside when it hasnt really participated on the upside if it does, id much rather have a blended multiple that gives me onehalf of the netflix multiple for that portion of my business disney plus into 2023 and back into it value. You youre still getting benefits. Disney is the pace of the recovery of our country in terms of covid19, and i dont think parks and Consumer Experiences are going to be normalized in the next 12 months how can they be . Thats the flywheel for disney is ultimately their studio, their theme parks and Consumer Products are all meshed into the same fly wheel and without one of them they suffer. If you had a question of the ceo on the pretaped video that will drop on youtube at 6 00 p. M. If you had the opportunity to ask questions, what would that be i think it would be whats the saturation point for viewers and what theyre willing to pay in monthly subscriptions not just for netflix but for all the streaming competitors . Where do they just get tapped out and they cant pay anymore good question there netflix shares down by 10 right now. U. S. Attorney general william barr adding fuel to the china trade war fire today with comments about the countrys quote, unquote, predatory trade practices. That could have some big consequences for american tech companies. Reporter with china at the forefront of the election, the Trump Administration has gone full court press in recent days, legislative actions, policy considerations and Public Comments from highranking cabinet officials. Just today it was attorney general william barr making a speech in grand rapids where he took direct aim at beijing, the rise of its authoritarian regime notefulably he said american teh companies were complicit in that listen corporations such as google, microsoft and apple have shown themselves all too willing to collaborate with the ccp reporter he suggested these companies have bent to the will of the Chinese Communist party to do lucrative business there he suggested that apple did so when it agreed to store icloud data on chinese servers. He criticized social networks for only recently complying with government requests for user data and even said disney is sacrificing critical intellectual property. Like other American Companies, disney may eventually learn the hard way the cost of compromising its principles. Soon after disney opened its park in shanghai, a chinese theme park popped up a couple hundred miles away featuring characters that look ed suspiciously like disney trademarks reporter perhaps general barr is looking for more corporate soldiers to help fight what he is calling in that speech economic blitzkrieg given what some of these companies have responded behind the scenes to these comments, this fullthroated condemnation might not be the best way to solidify that. Kayla, thank you. As we all know, china is critically important to some of the u. S. s Biggest Companies you all remember all of these pictures weve seen them before u. S. Ceos shaking the hands of highly placed Chinese Communist officials. This is tim cook with president xi jinping in 2015 china accounting for 43 billion of apples revenue last year or 16 . Elon musk met with chinas premier last year. Tesla got 3 billion in revenue from china, about 12 . They also have the only fullyowned u. S. Factory in china. How significant are barrs latest comments, tim well, you know, a common enemy is a very important political tactical approach. That is absolutely what this administration is doing with china. Its a playbook weve seen followed in other parents of ts world. You know who those countries are. I love the pushback on china my political view on it is a very popular political view and im very much on board with a lot of it, but to be clear our form of democracy here is not the form of democracy followed around the world maybe china doesnt even have a democracy. But the point is American Companies are not going to find american democracy in every other country around the world either i think tim cooks done a pretty good job of preserving apples integrity and keeping the core values and staying attached to the culture of protection of rights and all of the things i think apple as a culture has maintained the fact that its one of its biggest markets and he has to navigate carefully around there, thats what every ceo will do. I think the doj and this administration have big mega cap tech in their sites to be part of a political campaign. Even before u. S. Tech companies have been doing this, i mean, theres of course the example of general motors, how they got into china, they signed jvs with local chinese companies. This has been going on for decades, steve grasso. This is the price of doing business you know what, american shareholders have benefitted from this. Right this is the cost of doing business [ indiscernible i think were having a problem, steve, with your audio. Well try and reestablish that connection guy, im not sure what the administration can do specifically to u. S. Companies doing business there this sort of goes into the overarching theme of ratcheting tensions higher with a very important partner, china yeah. Obviously i mean, think about it, its been going on now for the better part of two years again, ill say it, i think the rhetoric is going to continue to get, to your words, ratcheted up im shocked that the market doesnt take it more seriously than it does its astonishing to me that in the wake of this the market just keeps grinding higher. Im sort of on tims side. I am on tims side in this you know, somebody needed to address this situation with the chinese without question so this is not a political statement, but it has ramifications in terms of what it could potentially mean for the market and i dont think the market is at all pricing those ramifications in. Steves back. You were saying, steve so this is the cost of doing Business Apple and google and these large Cap Tech Companies dont have the loyalty of being a u. S. Company first. They have the loyalty of their shareholders, their First Priority and having a Business Strategy if you want to operate globally, this is the way you have to conduct yourself in china. But i think this gives the ability, to what guy just said, this gives the ability to have another reason why you want to sell growth and buy value. Im interested to see if its really a longlasting event and if it could last longer than 17 days. Come up, more bad news for the beatendown Airline Sector well bring you the details and what is sending stocks lower. Plus, twitter still feeling the pain from the high profile attack just how did this happen Cyber Security experts will join us and break it down. Later, looking to rack up some gains we have a red hot retail trade for you. Our Retirement Plan with voya gives us confidence. Yeah, they help us with achievable steps along the way. So we can spend a bit now, knowing were prepared for the future. Surprise we renovated the guest room, so you can live with us. Oooh, well. Im good at my condo. Oh. I love her condo. Nana throws the best parties. Well planned, well invested, well protected. Voya. Be confident to an