Netflix earnings, Mark Cuban: Market Domination Overtime

After the Dow Jones Industrial Average (^DJI) closes at another record high led by chip stocks, Market Domination Overtime Hosts Julie Hyman and Josh Lipton, joined by top Wall Street experts, break down the top stories affecting the market.

Stifel chief equity strategist Barry Bannister recaps his biggest takeaways from the third quarter earnings season and his expectations for the market.

Mark Cuban has joined Vice President Kamala Harris on the campaign trail. Yahoo Finance Washington Correspondent Ben Werschkul breaks down what the businessman and billionaire brings to the Harris campaign weeks ahead of the presidential election.

Netflix (NFLX) reported third quarter results that topped analyst estimates on the top and bottom lines. Bloomberg Intelligence senior media analyst Geetha Ranganathan outlines the result and discusses what's next for the streaming company.

Editor's note: The video above incorrectly indicates Netflix reported third quarter revenue of $10.13 billion and earnings per share of $4.23. The correct figures are third-quarter revenue of $9.83 billion and EPS of $5.40. The company's fourth quarter guidance projects revenue at $10.13 billion and $4.23 EPS. We regret the error.

This post was written by Naomi Buchanan.

Video Transcript

There is a close of me on Wall Street and now it is market domination overtime sponsored by tasty trade.

Let's see where the major averages ended the session here.

We have the dow closing at a record once again, the s and be slipping into the red just at the end of the day.

And the NASDAQ also closing.

Little change here in era is with us now to get us more information on today's action.

Hey, hey Julie.

Yeah, as you said, the dow notching a fresh record, but we have seen the markets off its highs session highs for the day taking a look also at the treasury, the yield curve is steeping a bit.

So you did see the 10 year up, nine basis points, a third year, up 10 basis points.

But let's take a look at the market action on a sector wide scale here.

So you're looking at energy and technology which led the gains today.

Technology really was the leader for the first half of the day then pairing some of those gains.

And we talk, when we talk about tech, we're really talking about, look at that.

Here is the magnificent seven.

you're looking a little bit at some gains with NVIDIA that's off its highs of the day.

We're really talking about semiconductors because those have been the ones leading the gains today with SM C's blowout quarter up 9% for the day, NVIDIA had touched an intraday record high earlier, but closing off of those highs so up just 9/10 of a percent.

And then finally, just as we had mentioned earlier, we have seen also commodities rising with gold up at record highs.

Guys Ines.

Thank you very much, appreciate it.

Netflix earnings just coming out in the past few moments here on third quarter.

Um The company saw a the number of its paid streaming subscribers rise by 5.07 million.

That's versus the 44.52 million.

That was estimated by analysts.

Uh the company seeing an increase in uh revenue of 15% operating margin was at 30% which was an increase of um uh of 8% points.

So basically seeing a pretty broadly earnings beating estimates at 423 as well revenue coming in at $10.13 billion.

So the company um beating estimates, it seems like the forecast also leaves it room to beat estimates as well.

Full year revenue gonna be 43 to $44 billion.

Basically mid point there $43.4 billion.

So pretty much in line, but you see the shares bouncing around here.

Um as uh as people trying to sift through these numbers.

Yeah, I mean, remember also, I mean to move Julie, the stock had made into this print year today.

It was up about 40% already.

This year was up around 100% in the past 12 months.

So we were gonna bounce around the after hours.

Um I I am looking to see, you know, there was a lot of questions about whether we would see a price increase.

Julie um any talk about that if so when and how much of an increase?

If not, I know some analysts were, were kind of wondering why not, you know, because their point being um in fact, the content they're popping out lately has been so strong and analysts will argue the October 2023 price hike was a success in their opinion.

Um Also, it's been nearly two years since they launched advertising.

So I know investors very hungry for more color on that too.

What, what is growth margins look like ahead?

Yeah, just uh going through some of the other stats here in the uh shareholder louder.

And um on the ad side there, the company said ad membership was up 35% quarter over quarter.

Their ad tech platform is going to launch in Canada in the fourth quarter then more broadly next year.

That's we know that, but they're just sort of confirming and they're also touting something that we talked to our, um, Alexander Canal about yesterday and that is the broadening of their types of offerings, right.

We know they're known for streaming movies, for streaming shows.

Um, but they're highlighting the NFL games that they're gonna have on Christmas Day.

They're highlighting the Jake Paul, Mike Tyson fight, um, as well as Squid Game Squid game season two, but just, you know, sports kind of leaning a little bit more into that and highlighting it in the Yeah, I think the NFL games is really interesting.

Um First of all, I, I'm more, I'm interested to hear how the kind of executives think about that and the strategy behind that is that, is that meant for Josh Lipton who's already a subscriber and NFL fan or maybe they're also hoping to reach new, new folks as well, maybe both, but certainly it indicates to you that they keep pushing harder and harder into sports and then broadly too Julie just, just how they think about content spend.

What does it actually look like in the quarters ahead?

Yeah.

So one thing I just want to note here on your question about raising prices, particularly for the ad tier.

They're emphasizing that it's very early on for the advertising initiative.

They say that in this place.

So you wonder if that's them sort of pushing back against the idea that they should already be raising prices when it's still pretty new here.

They're, they say point out they're approaching the second anniversary of that.

And in the third quarter, it was over 50% of sign ups in the countries where they have ads.

Um and that membership on the ads plan grew 35% quarter of a quarter, which I mentioned before.

So it seems like reading between the lines here, maybe they're saying like we're not ready to raise those prices yet until we're done.

Tinkering.

Perhaps with this offering, we shall save another record day.

Meanwhile, for the Dow Industrials, but even amid this record run on Wall Street, our next guest is still warning of downside risk ahead and joining us now is Barry Banister Stel, Chief Equity Strategist, Barry.

It is good to see you.

Listen, we just got uh the earnings report from Netflix.

It is up about 1% here in the after hours here.

Barry, of course, you know, pull back the chart has had a incredible run.

Curious to hear Barry so far as you made your way through earnings season, you know, reading through the reports, listing the conference calls, what have been some of your big takeaways?

Well, the no landing scenario looks like a pretty strong one now and it certainly renders the question of whether the fed should cut rates in 2025 at all.

A very good question to ask the financials particularly and their results tell us that.

Um, I, I think they should do maybe a couple quarters for the rest of the year, big deal.

Uh, but they should go out this year at four and a quarter and stop cutting rates.

Clearly, they're underestimating the growth potential of the economy.

Granted, there's going to be an adjustment up over time as rates reset to the higher level, but maintain them for a while until the reset occurs and then cut rates.

But don't just be in a hurry to cut rates.

So it's got to, we got to take some of the rate cuts out of future.

There's no doubt about it.

So where we stand right now, what does that imply?

You know, if they do another couple quarter point cuts, if they don't do any cuts, what are the implications then for stocks?

Well, if you take out the fed funds, futures for December 2025 which in the fourth quarter, average are pushing around 3.5 and you make it more like four and a quarter.

Uh You would have probably a pull back in the market which is not un uh uh uh entirely an unhealthy thing.

You know, we're in a very frothy market and you know, John Templeton once said that bull markets are born on pessimism and grow on skepticism, mature on optimism and die on euphoria.

We've crossed out of optimism.

We're already in this kind of euphoria.

Now, I mean, I heard your guest earlier talking about nuclear.

Um I was I I number two, ranked nuclear for or, um, engineering analyst for years back in the 20 tens.

I can tell you we're not gonna build any nuclear plants here for data centers.

It's just not gonna happen.

The NRC is gonna make it prohibitively expensive and the investors who go into it are gonna lose all their money.

Even for the small ones, small is worse.

You can't even spread your cost out if you look at what it costs.

If you've got a really rich big tech company who's footing the bill.

Well, that's great.

Let's take all their money.

That's probably what's going to end up happening.

I mean, if you think about it, South Carolina Gas Electric Scanner, they, they went bankrupt trying to build, uh, a, a new plant at summer.

Uh, if you look at Georgia, they built plant Vogel, it cost them multiples of billions of dollars more than they thought it would cost and it, when it to the rate base.

Um, no, there, it's just going to be very expensive.

It's not the approved design.

The A P 1000 design was approved already.

It's going to be the actual build that's going to be very expensive with the redesigns and the, and the make work that the NRC which has been accused of being too friendly with the industry, so they are going to be aggressive.

It's gonna, it's gonna drive up the cost now, this is not gonna happen.

I, I've seen this enough over the last 40 years, particularly in 25 years ago, in the tech bubble, everybody's all bullish and optimistic about tech.

Um We look at the market and think it's just expensive at 30 times cape operating earnings uh when it should be around trend line 26 5, it's about 800 points overvalued.

So, so Barry, I, I if it's Frothy, um, and listen, we've had plenty of strategists come on and, and I'll make that case, it's stretched.

How do you invest?

Then Barry, I'm actually trying to figure out at what point next year to put on a leverage short because, uh, I think it's just gonna blow up in people's faces.

Uh, we have the wherewithal if we use the absolute cherry picked lowest, uh, cape operating earnings yield of the last 35 years, which occurred in uh, late 99 and early 2000 occurred again in December of 2021 and the huge amount of liquidity that Powell and the treasury dumped into the system in COVID.

And it, uh, it's approaching that again when it hits, that would be at about 6400 for the S and P 500.

If you look at it a couple of other ways, uh We would also be at about 6400.

If we get there, we might have a, a really good short all the way down to about 4700, which is where this year 2024 began.

Uh So we're just waiting on that frothiness that um euphoria that I referred to earlier when I was doing the quote.

And then, um short, it, this is, um this is just like in 99 early 2000.

I remember those IP O si remember the silliness.

It's rapidly approaching that point, not quite there, but it's rapidly approaching that point.

Barry, let's switch gears here.

Talk, politics, talk the election.

Uh, you write in your latest note that it doesn't, it doesn't really matter who wins the election, who moves into the White House next month because you argue populism has already won.

What are the, the implications of that, Barry?

Well, a week before the 2016 election, I actually wrote a note saying, I don't know who's gonna win but populism is already, you know, is gonna win and that's really what matters that had it been Trump.

You'd be a populist.

Had it been Clinton?

She'd have been hijacked by the populist wing of her party, which is Bernie Sanders and a OC.

Indeed, we've had the populist left and right.

Trump and the Sanders.

A OC Warren wang run things now for eight years, we are in populism full on and the question is, what kind of populism populism is protectionist?

It's, um, usually gets into conflicts, unfortunately, by turning inward, it, it creates a more unstable world and it's almost always high fiscal spending and reflationary and they will force the central bank to do their will over time, it's called fiscal dominance.

So we are in that now, there's no question in my mind that we're in that.

Now, the question is what flavor and we're going full on populism in the future, which will tend to be slightly reflationary.

Yes.

Well, we'll see how that plays out.

We'll check back in with.

You gotta leave it there for now though.

Barry, thanks for joining us.

Thanks Vice President Kamala Harris as a new uh has a new presidential campaign trail partner, billionaire businessman Mark Cuban here with more Washington correspondent Ben Wu.

Um be so what is this trail partnership look like?

Yeah.

Yeah, it's sort of the she has her own kind of billionaire bro to, to go along with her today.

So Mark Cuban clearly has been a, a Harris advocate for a long time now.

He's, he's been very vocal on podcasts and in appearances and on X.

But now as of this afternoon, he's kind of a formally minted campaign surrogate.

He appeared with Harris this afternoon at a business school in Milwaukee.

It was, they went to a business class to discuss entrepreneurship.

A fun little tale is that this is a school according to the Harris campaign that runs their own kind of mini shark tank competition, which is obviously the show, Mark Cuban appears on where they, they actually fund students who have good ideas.

And so they're en route to a second event now and then Cuban is going to do his own events this weekend in Arizona and, and Michigan.

And it's part of kind of the larger context here is the, the fight for young men.

Cuban is clearly very popular among young younger folks in the world of finance and business and men in particular.

And so that's, that's kind of, this is kind of one aspect of, of a multi pronged effort from the Harris campaign we're seeing this week on that front.

It's also kind of the, the battle for the billionaire, bros.

I I was on with you guys yesterday talking about Elon Musk.

So he's kind of the Donald Trump side of this.

He's in Pennsylvania doing a speaking tour himself.

So, so they kind of both have their own folks on each of their sides, any risk to linking yourself so closely be hip to hip with Mark Cuban.

Um I mean, I think he, he, he's, he's sort of mixed.

I think, you know, the the guest was talking about populism.

I think you kind of cut against that perception with this with having Mark Cuban as one of your most vocal friends.

And his message is that Harris is friendly for business.

Harris is open for business.

Harris wants to have businesses succeed so it helps on that front.

So there, there may be areas where he's less popular.

I think there's, there's more downside depending on the different folks you're seeing here on the trail but, but Cuban seems, seems sort of pretty well known.

All right, thanks Ben.

Always good to have you on the show.

Appreciate it.

Coming up, Netflix shares jump and follow their latest earnings report.

We dive deeper into the numbers with an analyst.

Right on the other side.

Stick around more market domination over time.

Still to come.

Netflix delivering a beat on revenue and earnings for the third quarter.

The streaming platform also topping estimates on its subscriber editions.

Its revenue outlook came in ahead of Wall Street's expectations just to run through the numbers and reiterate them quickly here.

Uh The company's third quarter earnings per share $5.40 512 is what analysts had been anticipated there.

The company said in the third quarter, it added streaming paid subscribers of 5.07 million that was ahead of estimates.

And for the fourth quarter, it predicts that earnings per share will come in at $4.23.

390 is what analysts have been anticipating.

Initially.

The shares were sort of bounce around below it right now.

They are higher.

Let's get more on the, we've got Bloomberg Intelligence, Senior media analyst, Githa Ragan and uh Gita, it's good to see you.

So as we look at these numbers here, it seems as though expectations going into this report were already pretty lofty Netflix.

You know, people aren't sort of automatically satisfied even when Netflix comes out with a beat, talk me through sort of the quality of this beat, so to speak, it's a pretty high quality beat.

Uh Julie, I mean, if you were looking for the subscriber numbers, they were definitely there.

Uh if you're looking for the top line growth number, they obviously over delivered on that.

But I think what really kind of stood out to me was their margin guidance.

So they've already upped their margin guidance.

Now, so many times this year, uh you know, first going from 24 to 25 to 26 and now 27% that's over 600 basis points of margin expansion from 2023 to 2024.

Uh What was slightly uh you know, again, I I'm not sure whether they're just trying to take a very conservative approach into 2025 but they are basically targeting 28%.

So again, there is going to be some uh operating margin expansion.

It's probably a little bit of a conservative approach.

Uh but, but this is, this is exactly how Netflix wants to spin their new narrative.

Remember in a few months, they are going to stop disclosing subscriber metrics.

They really want to position themselves as a top line growth story and definitely as a bottom line growth story as well.

Git uh do you think a price increase is coming here?

And if so when and how much uh you know, some analysts who cover the name were saying, why not do a price increase just given the strong high quality content they're putting out there right now?

Yeah, absolutely.

Josh, I think a price increase is long overdue and I think that's really what investors are looking for because if you look at the story, if you kind of look at the big picture, you look at the valuation of the stock, I mean that it's premium valuation, there's no doubt about it.

And that valuation, you know, revenue growth is really kind of what underpins that, that lofty valuation and for you to have consistent revenue growth, obviously, you need those price increases and why not?

They do have pricing power.

You're absolutely right.

We've seen tremendous engagement on the platform.

Uh you know, and they're able to sustain that.

So it's obvious that, you know, they have a lot of pricing power.

I think they're just waiting to see, see how to kind of implement that price increase.

They're going to have to do it very carefully because remember they're trying to balance subscriber growth along with revenue growth.

At the same time, they also have to grow their advertising tier and how much they grow, their advertising tier will depend on how they price the ad free tier.

Because if they really increase the price substantially, they could end up driving a lot more subscribers to that ad based here and beefing up their their advertising revenue So again, it's going to be a really careful balancing act.

Yeah, it sounds tricky for sure.

Geeta.

Um but do investors really want to see that price increase?

You know how they figure it out?

What's the urgency there and sort of what kind of catalyst could it eventually provide for the shares?

If and when they deliver it?

It's definitely going to be a positive catalyst.

There's no doubt about that.

I mean, all their competitors are raising prices and this is why, you know, investors are kind of expecting this.

If you just look at Disney, they are going to be raising prices substantially actually today.

Uh you know, Max has raised its prices and they're all actually now if you look at the standard ad free tier, they're all, they're all pricier than Netflix.

And that just doesn't make sense, kind of given the catalog, given the depth and you know, breadth of the Netflix Library.

So I think, you know, investors are definitely looking at Netflix holding all the cards here.

It's, it's just now going to come down to timing and the timing is what is so uncertain and so unclear at this point.

So obviously, the NFL games coming as well, which is so interesting, I mean, pushing harder and harder into sports.

I'm just curious how you think about that and, and what is the, the strategy there?

Githa, you know, is that, is that for, you know, Josh Slip in, I'm a Netflix subscriber.

I'm an NFL fan.

So keep me loyal or is it to attract, you know, new subscribers or maybe it's both, it's a little bit of both Josh, definitely, but it's more a statement to the advertising community.

It is more a Netflix has arrived in the advertising business kind of a statement.

Uh You know, you are going to, they obviously have a built in captive audience.

Uh We, you know, we know from some past experiences with Peacock ho hosting a wild card game that this is this does become a major customer acquisition event.

Netflix already has 75 million subscribers in the US.

They obviously will gain a, you know, a few million more I think with, with this event.

But more than anything, it's, they're gonna have people hooked to the Netflix platform.

I mean, they have two games back to back, they're gonna have them hooked pretty much for that whole day.

The big question is as you point out once those customers come, are they going to stay and probably they will, you know, you have Squid game two coming into the very next day.

So they've got their con content line up, uh you know, crafted pretty, pretty uh nicely here.

Neha It is Net you know, Netflix for a while obviously was the only game in town.

Then there was a lot of competition all of a sudden and there were some concerns.

It feels like Netflix has come, come back to a place of dominance.

Is that how you see it versus the streaming competitors?

Absolutely.

They have won the streaming wars.

Undoubtedly, Julie, uh you know, they have become, they've, they've definitely established their place in the living room now.

This is, must have content without a doubt.

I mean, you know, you, you just gravitate towards Netflix, you know, most of the time and if you just kind of look at the stats as well, they prove the same point.

So uh 40% of all TV viewing is on, you know, streaming platforms, half of all streaming television viewing is happening on youtube and Netflix.

So they absolutely dominate the streaming landscape.

And so that gives them then pricing power that gives them then that base to go to advertisers, it's just going to now become a question of execution and monetization.

Githa always great to see you and have you on the show.

Thanks for joining us.

Thank you time now for to watch Friday October 18th sponsored by Tasty Trade.

Starting off on the earnings front.

We to get some more reports from the consumer goods and financial sector including Procter and Gamble and American Express, Procter and Gamble.

That results for the first quarter before the opening bell and expecting the company innovation to help sales accelerate into one.

Moving over to housing monthly, housing starts building permits.

Data that's coming out in the morning, the Communist forecast both to dip slightly with housing starts at an annual pace of 1.35 million and building permits at 1.46 million in the month of September.

I'll be taking a deeper dive into housing later on in our chart of the day and taking a look at the fed.

We're gonna be getting some more fed commentary from fed Governor Christopher Waller in the afternoon.

This is coming after comments from Waller on Monday calling for a more gradual pace on interest rate cuts after some mixed inflation data, that'll do it for today's market domination over time.

Be sure to come back tomorrow at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

But don't go anywhere on the other side of the break.

It's asking for a trend.

Got you covered for the next half hour with the latest and greatest market moving stories so you can get ahead of the themes affecting your money.

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