The Company Needs to do to keep the stock soaring. We start off with netflix. That stock is taking off after hours to an alltime high after crushing earnings expectations for subscribers growth lets get to Julia Boorstin for the latest details. Reporter melissa, netflixs investment in original on tent is paying off driving the company to beat on the top line and with that all important subscriber number. Netflix added a total of 5. 2 million new subscribers in the Second Quarter thats 2 million more than the Company Projected in whats a seasonally, usually a seasonally slow quarter the companys also projects better than expected growth in the Third Quarter as well. Saying it expects 4. 4 million new subscribers in q3, thats nearly half a million more than wall street was projecting so, whats driving this growth its content lots and lots of new content including 14 new seasons of Netflix Global originals, such as 13 reasons why, and stranger things. 13 original comedy specials, six original documentaries, and nine original feature films as the Company Invests more in movies that will debut on netflix first. Now, netflix making a point in the letter to shareholders, about netflixs commitment to making movies like okja and war machine that debut on netflix while could be in theaters saying its breaking all sorts of hollywood rules but he believes internet tv can reinvigorate the film business also factor driving growth, partnerships with Consumer Electronics companies and video game consoles to make it easier to sign up for netflix and watch netflix. They cite netflixs partnership with altese in france which was announced in q2. In his letter to shareholders, hastings dismissed concerns about competition saying the exclusive nature of content on hbo, amazon and netflix, means theyre not direct substitutes for each other an theyre all growing, the shift to ondemand internet tv. Hastings talking quite a bit an this new renaissance of internet tv were in right now. Melissa . Julia, thank you so much. Julia boorstin in los angeles. Another blowout quarter under its belt, is netflix a mustown stock, even up here 10 . I go to david first because you pitched in the fast pitch netflix last week. Guy backed me 100 . Look, it was pretty clear early on in the quarter three weeks into the quarter they basically backed their guy, said they had 40 of the subs that they guided for already booked which is incredible so you look at this number, blowout number obviously have the tempo down, figured out how to guide the street correctly its all about the International Subs they knocked the ball out of the park this is a name you stick with. I dont know if id run out tomorrow and buy this thing where it is, maybe it settles in a little bit this is a name long term you have to own. What do you think, dan . David did call it right on friday afternoon i was a bit skeptical. The stock sold off maybe 15 from early june highs and came roaring back in the last couple weeks. To me, i think the bull bear debate was playing itself out in the stock over the last month or so, but i dont chase stocks like this. I think obviously this is really important here, i mean, you know, u. S. Subscription growth just reaccelerated again this is something that i think a lot of investors had expected to really take a back seat to the International Subs but they also killed it there. Ill just go back to what julia said about this original owned content. We saw this last october, the stock exploded nearly 20 the day after they reported their q3 earnings they saw a big spike in u. S. Domestic subs, bigger than expected because of things like stranger things, that sort of thing. They seem to be able to dictate some of the growth when they have a string of hits. The question is, how much does it cost to create those hits how reliable are they to forecast out if the street is at 1. 8 billion in Free Cash Flow losses for 2017, how much at what point do investors say, you know what, how much money are you spending in order to achieve these numbers . Which has been the right, right, when does that spe speak . I dont know where he stands on it now, i dont want to speak out of turn, thats been the bare case, bare thesis for some time i do know the answer to this, david basically had this Earnings Report in his hand on friday because everything he said came to fruition. Weve been steadfast on this name to answer your original question, can you stay with it absolutely it was the Third Quarter guidance theres absolutely no reason for netflix to give, in my opinion, the type of guidance they gave they raised eps guidance by about 35 . If you look at it. I mean, pretty significant numbers. Whats the point the point is, you can talk about competition all you want, theres no competition for netflix right now. With apple we talk about it, know later on were going to talk about katie hubertey. Having that what they want to use as a way to get their video. Taungs about europe specifically so what does all that mean it means theyve got the content, thats been strong. They are putting the money down to do that but theyre also executing well enough that people are very excited to still continue to be there and you can obviously see something of the growth in front of it. So, do you chase it . I agree. Im not sure youve got to chase it on this when they say, theres no more gas, no more room for the kind of growth they had and put up a quarter like this and the guidance, says theres plenty of room to the upside. Is there a readthrough . Even if the readthrough is the first earnings out of the gate, the area of growth for investors, people are looking for these stocks to deliver on earnings because the stock have run up so much. Is there a readthrough to other paying stocks in particular i think the next best setup is amazon unquestionably the next best setup. I look at that and say, gross marg margin, second half of the year, thats going to be improvement thats a name. I know its had a massive run. Just like netflix did, thats a stock you can stand by the ones that have risk to it, i look at facebook, say theres a concerning its concerning with google l as well. I would say this, you just mentioned apple. Think about it, one of the big Growth Drivers for apple is services when you look at this Company Growing sales, you know, 28 year over year, i know you get excited about Apple Services growth in the teens year over year when you consider their installed base of a billion ios devices, its pretty unimpressive to me thats the takeaway i sigh when you look at a company like this, destroying it on Revenue Growth obviously, negative Free Cash Flow for years seems to be a page out of the amazon model they tell you, were not going to make money. Were not going to make money really for the most part but were going after consumers and going after Revenue Growth then lets see where the chips fall where they may. Mitting t is Reid Hastings hd job. Thats the key to the story. Tesla, thats an execution story. Netflix evolved into an execution story. They hit everyappropriately. Is netflix more like a tesla than it is a facebook or google . Yes yes. I believe thats the case. Its a story you need to believe in, and need to believe in Reid Hastings i think without Reid Hastings, its a completely different story. I dont know if the story even exists, frankly, without Reid Hastings i agree, i think its more like tesla. You know, say this again i mean, all the bear arguments have been made now for the last few years. At a certain point, you got to start believing its a land grab and they are with the exception of one time, they took one misstep when they raised prices seemingly out of nowhere. That was years ago now. Years ago now outside of that, theyve been flawless. This is why you always look to specific analysts, though, every one of these stocks. We bring it up all the time. Mark ma haney, has he ever wavered on this stock at all weve had him come on the show and actually debate. There are guys out there and gals out there who are phenomenal in a certain spac and just a month ago is when he came out and talked about content, he talks about penetration, he talks about satisfaction all of those things and all of a sudden what did we get today we hit everything. All right for more on what Reid Hastings can do or should do to build on this momentum, lets turn to nit politics cofounder mitch lowe who joins us on the fast line. It seems like the companies can deliver on important metrics investors are watching so closely, what the next leg of growth for netflix, where does that come from, in your view well, i think were right at kind of the early stages of a complete conversion in the way people watch television. I really believe that subscriber growth still has a lot ahead of it, not only in the states but internationally. But the real way to measure their performance going further forward is how they monetize this content the great news is theyre building an Amazing Library of content that they can monetize over the comal ye the coming ye behind time warner and disney and others, how many dollars they generate for every dollar of content i think they have huge potential there and they just, you know, begun to go down that route. Hey, mitch, you know, obviously netflix has a lot of competition. We know apples coming we know amazons there and a lot of other when it toms to streaming video. Do you see netflix, do you think it makes any sense for them to set their sets on the streaming audio segment . Obviously spotify is growing fast, very fast, growing faster than apple music, pound for pound, 55 million paying subs. Is that something you see as an extension of their strength here and they could probably get a hot lot of bang for their buck, take down a lot of costs, raise spotifys margins. My guess is no. You know, i remember reid always told everyone in the organization, i think this is one of the key things to netflixs success is focus on that one thing you can do better than anyone else and continue to build that and dont get distracted by other businesses so i dont see that. You know, anything could happen, but i you know, i think as long as they see continued growth, builtin subscribers and monetizing the content, i dont see the distraction of going into other side businesses mitch, i dont know if you heard our conversation before, ill paraphrase quickly. I said the one misstep theyve taken is they raised prices seemingly under the cloak of darkness one day and the stock got obliterated. Now four, five years later, is their Customer Base conditioned enough where if they were to raise prices, it wouldnt hurt as much as it did hatlf a decad ago . Well, definitely, youve got, you know, with the kind of satisfaction rates they have and the huge leads, being able to identify the right content, i mean, look how quickly they achieved what it took hbo many, many years to accomplish with the quantity of emmys and the quantity of solid content that people love. So, yeah, i think theyre on a great pace to continue that march. Whats the one thing on the Conference Call, mitch, you would like to hear Reid Hastings talk about well, i would love to hear about, you know, what that plan is you know, how are they going to build other Revenue Streams from that this great content that theyre developing you know, is there is there branding use, is there products, is is there, you know, i mean, done an amazing job at theme parks and other things whats the obviously netflix isnt going that route, but what is their plan to increase the dollars per dollar spent, the dollar revenue on their content . Thats what id love to hear more of. Are you convinced, mitch, that threat politiat netflix hae original content strategy down pat . We put up the q2 content winners of some of the most watched shows on netflix in the Second Quarter, two of them are on their final seasons. Right . House of cards and orange is the new black. Unbreakable kimmy schmidt in the third season during the quarter they canceled a number of shows such as blood line as well as the getdown after only one season. What do you think of their strategy at this point is it working . Are they still finding their ground yeah, its willfully not an easy thing to do its not all science or and analysis it takes a combination of the creative and the analytics to understand what your subscribers want to see and how much they want to see it and what impact it has on both churn and acquisition and i think netflix is way ahead of everybody on that the problem, always, is you have to bring in the creative element. Its not like you can actually, you know, force directors or writers to create the exact kind of content that you know is right. So, i think that netflix has a proven team that understands content and understands how to utilize the analytics behind not only choosing, but also on how to promote it. So, you know time will tell there definitely will be missteps along the way, but if you correct them quickly and learn from them, which i so far have seen them do, i would have a lot of confidence in their able to add more content to replace those ending seasons. All right mitch, great to speak with you thanks so much for phoning in. We appreciate it mitch lowe, cofounder of netflix. Ceo of movie pass. So i send it back to you in terms of what do you think of the strategy, are you worried these cancelations could upper shadow more missteps im not a couple points. Look, content is king. Theyve been investing it in properly a couple l things to point out dans point of chasing the stock, dont chase the stock up here because theres a massive Short Interest i think 26 million shares short. Youre going to see covering in the next couple days two, their investment, you heard him mention on the call, in content, has been off the charts and driving the stock. Theyre going to continue to do that three, i think this company does get acquired i think disney is the potential company that buys them i give it less dhanthan a year. Youve been a proponent of that for a very long time. Why would Reid Hastings want to sell hes the king of the world right now. You know what, at a certain point, at a certain point you have to say, is this the right time to make the exit strategy i mean, its been true all throu through mankind. This could be the quarter that says if i can get a 100 billio deal done, 80 billion Market Cap Company probably with this move ive said it for a long time now i thought disney would buy them. Thats 10, 20, 30 on the stock. I do think Reid Hastings would be the perfect person to take over from bob igor. I would say that i think this guys thinking another 10 or 15 years out. I dont think hi wae wants to b acquired why i asked the question about spotify. I suspect theyre going to go somewhere down the media spectrum hes going to continue to do i mean, listen, they have 100 million sub in video and spotify with 55 million. Want to better compete with apple, better compete with amazon, start going who zontically i think. When you get to full growth potential, whats a appropriate multiple among the story make the assumption, look forward, say, in 2020, lets say youre looking at possibly 10 in earnings. Lets say it ramps to 10. 2020, 2021 throw a multiple on it and do the math reverse engineer, say, can they grow into their earnings amazon never did. Its a 450 billion company. I mean, my point is, this thing could continue to go as long as we have a bull market. You know, i mean, right . Coming up, earnings season in full swing. The chart masters three stocks reporting this week that could be big winners for your portfol portfolio. Plus, wall street bulls are running toward apple as it gears up to launch the iphone 8. Could the super cycle be facing major delays well explain. Later, tesla under pressure after ceo elon musk said the stock was overvalued even after its recent 20 selloff well hear what he had to say, next much more fast money still ahead. Welcome back to fast money. Tesla shares sinking 2 after ceo elon musk once again called the stock overvalued that kicks after our top trades. Musk spoke about the 50 gains this year at the National Governors association on saturday i find it quite tough when there are very High Expectations i try to actually tamp down those expectations as, you know, if possible. In fact, ive gone on record several times as saying that the stock price is higher than we have any right to deserve. And thats for sure true based on, you know, where we are today and have been in the past. So, the stock price obviously reflects a lot of optimism about where tesla will be in the future he followed up on those comments today in a tweet saying i should clarify, teslas stock is obviously high based on past and present, but low if you believe in teslas future, place bets accordingly we should note in the last hour the Company Announced it was adding 21th century fox Ceo James Murdoch and linda jaunsen to its board this, of holders wanted the board to be a little more diverse and also not as too friendly in, you know, closeness. This is not going to be nearly as friendly as it was the question is, at 319 1 2, what to with tesla now, 387 stock, i think a month or so ago, so the selloff has been pretty dramatic. I think everybody would agree with that. I still think you have to everything he said, by the way, it is expensive in terms of the past and in terms of the present. You can say that about a lot of stocks the point we make all the time is you have to believe in the vision and the story thats the point that b. K. Makes. Im a believer i do think theres a potential for it to trade down to the 285 level, the alltime double hot top we saw a co