Transcripts For CNBC Squawk On The Street 20150416 : vimarsa

Fisher and the eu trust complaint against google and World Bank President Jim Young Kim. We wade through earnings from goldman and city. Try to hang on to 55 and the tenyear around 1. 08. Netflix shares poised to open at alltime highs. They did beat expectations. Netflix issuing upbeat subscriber guidance for the current quarter. We know what happened to the shares after the bell last night. Up 12 to 530 and change. Fpr with a price target of 900. I thought that 750 the other day was aggressive. I dont know what the implied multiple of 900 is. Subscriber growth is what shareholders are most focused on. Not earnings per share or anything else. There is no doubt netflix did better than its own estimates and many of the estimates of analysts that follow it. International becoming an important part of this company. The margins over there start looking worse rather than better. Youve got to rely on the u. S. On that front. Again, its right now all about growth of that subscriber base, which is 62 million now, i believe. Yes. Fbr argues they see 180 million global subs by 2020 60 in the u. S. Alone. They argue international is an opportunity. 6x u. S. Earnings was a miss. 38 cents misses 69 because of currency. His point on the call really was two things. One that hbo now is not arrival, per se. They can coexist. Its a war now on linear television, which he says had a nice 50year run, which is apparently now beginning to come to an end. Its very interesting he should frame it in that way. Today ever core repeated a sell. Specifically what they point out is there will be new entrance to a well resource into this field. I dont know if hbo becomes that call down the line. They point out Free Cash Flow has gone from positive 23 million to negative 163 million. They say in valuation perhaps shouldnt be as high as it is. Clearly momentum is there. I think its 800,000 subscribers above what they themselves forecast. Estimate was about 4 million and almost 5 million in three months. Listen knows who have been naysayers continue to talk about the off balance sheet, liability in terms of the way they account for their programming costs. All the new programming, of course. It is many billions of dollars. Amortization policies. None of this resonates with shareholders who again are really focused on their ability to get to perhaps they will get to that 120 million sub number. You cant doubt reed hastings. We are at perhaps the earlier stages of a true change in the way people view things. What it means for that ecosystem is crucially important for those who invest in so many of these Media Companies as they are trying to slowly but surely adjust to what is going to be this world of what we called over the top for quite some time. Different offerings. Eventually the dissolution of the cable bundle. That will take a long time. We said there will be quite a few people for whom it makes sense to pay for a bundle. Obviously, heavily shorted name. Must have been a lot of covering going on last night. Well see if the stock goes down. Three Companies Making their wall street debuts each pricing their ipos at the top of their expected ranges. Etsy pricing at 16 a share, valuing the Online Shopping marketplace at 1. 8 billion. Party city pricing at 17 a share with a 2 billion valuation. The not uncontroversial High Frequency trading firm virtue financial pricing at 19 a piece. Well bring you all their opening trades respectively during the course of the next two hours maybe followed by interviews with each of the ceos. Lets head down to the nasdaq where john fortt has more on etsys ipo. Theyve got the sellers out in front of the nasdaq in times square showing their wares. Pretty festive over here. They are going to ring the bell here. Heres one of the bells they are going to ring. You can buy this bell on etsy. Theyve got sellers here who are going to be ringing the bell if you look at etsy and that 1. 8 billion valuation happens to be just about 1 10 the size of amazon. If you think where they are hoping to fit in the ecommerce space, if amazon is like safeway, etsy wants to be whole foods. Some stuff is more expensive. They are unapologetic about that. Its unique and crafted in a way that is not about efficiency and squeezing every penny out of the supply chain. They want to give the feeling of everybody able to prosper. They say in s1 2 3 of their manufacturers in their ecosystem have fewer than 20 employees in manufacturing. Their buyers are also very loyal. 78 of revenue, people who came to etsy were repeat purchasers in 2014. That is impressive when you consider their growth overall was quite strong. They also had a number of new people coming in. Overall question is how quickly can they expand internationally . How quickly can they offer more Seller Services that gets them more revenue in the chain. Of course profits. They are not profitable. They might do things to uphold their culture that dont line up with getting profits quickly. Well ask the ceo about how important profits are to him and when they might come. All that coming up as they get ready to trade shares the first time. I think they said explicitly they may never be profitable. You dont know how much of that is boiler plate where they throw that into the documentation. How do they think about profits . Do they think of them as being important, not for the sake of just making money, but for being a viable way to spread their Mission Going forward . The old hp model of profits . Curious how he talks about that on a day like this. We should mention the structure of the deal. They reserve, i think 15 of those shares off the small investors. 5 i believe it is. They can get them in allotments of 20 up to 2,500. They are opening it up to their community, as well. They seem focused on this isnt about us about the people at the top of the chain. We want to bring our sellers in to ring the bell. We want to make the ipo accessible to them as well. Alibaba was very focused on their book. These guys kept the book very small. Clearly nothing like the size of the alibaba offering but very small in terms of any institutions getting in there. Not going to get a lot of hedge funds flipping. They are not going to make their lunch money as they often try to do when they think there would be a first day pop. From a New York Point of view its one of the First Companies of this era thats gone public from this new world, if you will of Silicon Valley whatever you want to call it. Its brooklyn. Pfizer came out of brooklyn. Brooklyn representing. A lot of people were disappointed tumbler sold to yahoo rather than going public. They are looking for a market cap close to 2 billion. That is a big deal for a company to go public to bring its culture to the fore rather than be subsumed by somebody else. That is a big deal for new york. We always talk about what i call creeping ipo marketing inflation. That is the show that gets put on at the various exchanges. Well see some of that at party city. What does the nasdaq have planned . They have these big orange booths in front where the sellers have their wares in a booth. Its like a craft fair happening on times square. Its amazing how well it fits. I thought times square little booths, thats cool. Then putting the goods front and center like this bell. A number of sellers will have their bells. They will grab this from me as soon as im done here because they will literally be ringing this and other more modernlooking bells, as well as they are ringing in the nasdaq this morning. John fortt, thank you. Hell be joining us throughout and well be watching etsy and talking to their executives as well. Lets get to some other earnings. Goldman sachs reports quarterly profit of a many 5. 94 a share. Goldman raised dividend to 6 cents from what had been 60 cents. Citi out with better than expect ped earnings. Revenue shy of what some on the street had been forecasting. I was able to make a couple calls on goldman. Numbers look very strong. Whether its Investment Banking. Led in part by a very robust m a market which their Financial Advisory fees were 961 million. Institutional Client Services always a key for this company. 5. 43 billion, higher than the last quarter. Goldman had a very nice quarter. The stock looks to be trading right around what would be a 52week high. At this point, i dont have it up that much. At least looking at the assets. Hit a sevenyear high after jpmorgan reported results earlier in the week. Fouryear high on quarterly revenue. Investment banking at 1. 9. Highest since 07. Back to precrisis levels to find banking levels this robust. He said we have to maintain what we are doing internationally around the world. If you look at the european banks, they are going to pull back further from where they are now which is ground for them to make up. If you look at what was available to him, its clear he had to go all in with what he had at Goldman Sachs. They did that and what appears to be growing in significant success. That firm has known success for a long time. They did buy back 6. 8 million shares over the course of the quarter, as well. Thats about 1. 25 billion. I usually like to look at comp which came in at 43com ratio. 42 from 43. Well talk about that and whether the money center is where all the action is. Saras interview with the eu competition commissioner on the antitrust complaint against google. Big the Washington Post piece calling her a tough cookie. At the nyse we are getting set for the ipo of party city. One more look at the premarket a day after the russell hits those alltime highs. The s p is not too far away from its own. What if a Small Company became big buiness overnight . Like, really big. Then expanded. Or their new product tanked. Or not. What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile, a Research Tool on thinkorswim. From td ameritrade. Ipos sara eisen sitting down with the European Union competition commissioner for the first word on the antitrust complaint they released yesterday against google. Sara joins us from d. C. With the latest. What mood was she in, sara . She was in a pretty good mood. She literally just landed in washington, d. C. We are talking about the woman of the hour commissioner vestager filed those official charges against google for competitive practices. I started by asking her what was behind the decision after several years of investigating google and even making settlement talks of bringing these charges now . Here is what she said. I think that there are reasons for doing this. To say google big successful company, very dominant in europe in general search our preliminary view is they have used that dominance to promote their own services. You cant do that to european law. I asked her how much influence and how much pressure was put on her by other American Technology Companies Like microsoft, lobbying against goog until this case and whether that was a big influence in this decision. A number of the companies who complained about google are american, but more companies are european. You find both. You find the people who complain being very direct and also very balanced about it. I think everyone admires the success of google but they also want google to play by the rule back. I asked if that was the influence in the decision . She said no you cant. We have to hear the evidence. And google android, she said we are in the very early stages of that. We talked about comparisons people are drawing between whats going on with the eu in regulation and google versus what happened to microsoft several years ago. The billions of fines microsoft wrapped up. Very interesting comments ill save for squawk alley about comparisons there. We talked about other investigations apple over its tax practices in ireland. Amazon over tax arrangements in luxembourg. I asked if she would be as tough on them as google. All that will be later in squawk alley. I asked about this idea she was a tough cookie more tough than they are predecessor. Shes only been on the job since november. She said that may be a fair statement, but she said she tunes out all the noise. I talked to a lot of european commissioners in my day. She was very honest and candid. Look for her to sharing a lot more of her conversation. Well have later in this hour the president of the world back Jim Young Kim and the host of today with very interesting thoughts on the emerging markets right now. Interesting her predecessor didnt file that statement until she came along. We did talk to googles head of Government Affairs for Economic Policy in europe on squawk alley yesterday. His name was adam cohen. Here is his response to the eu charges. Look at the tremendous innovations. We cant stand still. We face enormous competitive pressure. Well respond to that in the marketplace. Can i just say not to underestimate the politics of what is going on here. The last competition commissioner explicitly complained of what he described as defensive and irrational pressure from politicians in europe to reopen the google case. He is gone. The new woman in the case decided to do that. I think that is important. If sara didnt have a bunch of highprofile guests when we come back shell talk with Federal Reserve vice chairman Stanley Fisher. What he has to say about the u. S. And global economies. Premarkets relatively weak. We got good numbers out of goldman and netflix. The pursuit of healthier. It begins from the second were born. After all, healthier doesnt happen all by itself. It needs to be earned. Every day. From the smallest detail to the boldest leap. Healthier means using wellness to keep away illness. Knowing a prescription is way more than the pills. And believing that a single life can be made better by millions of others. Healthier takes somebody who can power modern health care. By connecting every single part of it. Realizing cold hard data can inspire warmth and compassion. And that when Technology Meets expertise. Everything is possible. For as long as the world keeps on searching for healthier. Were here to make healthier happen. Optum. Healthier is here. If youre looking for a car that drives you. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. Goldman sachs beating expectations. Citi rising on its quarterly results. Joining us on the phone is bank analyst from. I think the response was its like the days long ago they beat the numbers so handily you have to make sure the numbers are right. Are we back in that neighborhood . I dont know necessarily back in that neighborhood but it was a Strong Quarter for a number of businesses particularly Investment Banking advisory and of course fixed income trading. Why the disparity between the likes of a goldman in terms of trading revenue down at citi up at goldman . Whats going on there . Well part of that is just a function of the fact citi had a good quarter a year ago. Its important to remember that both are up significantly sequentially and citi put up a 3. 5 billion number. That is a bit higher than goldmans. I think that got lost in the noise today. That is good. Youve got loan demand better across the board. Legal expenses regulatory expenses at least starting to normalize a little bit. Obviously client activity is looking more robust. Is the regional over Money Center Bank trade coming to an end . Im not sure that it is necessarily. Some of the Capital Market trends will probably continue we would argue, for example, the strength in m a advisory is probably in the early stages of a secular trend. With the regional banks, we remain concerned about credit exposure to the Energy Industry and how that managed the next few quarters. In goldmans case comp ratio comes down a little bit. There were comments about improved operating leverage. How sustainable is that . These levels of revenue, its certainly sustainable. One of the beauties of the Investment Banking Business Model is that since comp is the biggest cost line item you can control it in both directions. As you get this rebound in revenue, the absolute level of comp goes up but the ratio doesnt have to increase as much. Eric Goldman Sachs Conference Call begins in about six minutes. Anything anybody should be listening more closely for on the call . Certainly i think the two key things are the sustainability of some of these trading trends. Secondly the use of excess capital over the next several quarters. Eric thanks for coming to the phone. Thanks very much. Eric wasserstrom. Opening bell five minutes away. Three ipos on the docket. At mfs, we believe in the power of active management. Every day, our teams collaborate around the world to actively uncover, discuss and debate Investment Opportunities. Which leads to better decisions for our clients. Its a uniquely collaborative approach you wont find anywhere else. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. You are watching squawk on the street live from the Financial Capital of the world. Opening bell in about 90 seconds. Our director just said more cow bell which is what you are about to hear as party city rings the opening bell. They staffed the floor with supporters and investors in a bunch of different gear a