Closing Bell - Closing Bell: Netflix on Deck… So, what’s at stake for tech? 4/18/23

Episode Date: April 18, 2023

A lot is riding on the so-called FANG stocks this earnings season with tech performing well so far this year. But can Netflix keep that momentum going? We break down what to expect and what it might mean for the broader sector. Plus, Bank of America CEO Brian Moynihan discusses his company’s earnings, the state of the banks and the economy. And, retailing legend Mickey Drexler – Alex Mill Chairman and Former J. Crew and Gap CEO – weighs in on the consumer and where he sees the retail space headed from here. 

All right, Kel, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make-or-break hour begins with the countdown to Netflix earnings just about an hour away, and the first of the really big Nasdaq reports to hit the tape. The stock off to a pretty good start this year, too, which makes that release all the more important, and we're going to walk you right up to it. We also have a couple of big exclusives coming up this hour. Bank of America CEO Brian Moynihan and retailing legend Mickey Drexler. They'll be along in just a little bit. Here is your scorecard with 60 minutes to go in regulation. The Dow having a tough time getting much of anything going today. Goldman Sachs,

Johnson & Johnson, UnitedHealthcare weighing a bit on that index. NASDAQ lower, as you can see, as well. Not too much, but that does bring us to our talk of the tape. All that is riding on the so-called bank stocks with tech and communication services, the two best sectors of the year by far. The big question now, can Netflix keep that momentum going? Let's bring in our Julia Borsten with exactly what you need to know for that report in about an hour. Julia. Well, Scott, this is the first quarter for which Netflix has not forecast subscriber additions. So a key number that we're watching is the company's own forecast for four percent revenue growth. Earnings per share are projected to fall about 19 percent. So Netflix's outlook

will give insight into two of its key initiatives. First, there's the company's crackdown on password sharing with its slow introduction of what they call new paid sharing options. And then the second key issue is Netflix's lower cost ad supported subscription tier, which launched late last year. We're going to have to see if that lower cost tier drives ad subscription growth. Netflix, though it didn't subscribe, didn't forecast the additions. We do know that analysts are looking for the addition of one point four million new subs. Now, Scott, this is also Netflix's first quarter without Reed Hastings as a CEO or a co-CEO. So we're going to have to see if he makes an appearance on the earnings call in his new role of executive chairman to answer some questions. Yeah, no doubt. That's an interesting

point, too. I forgot about that. Do you I mean, do you feel like we're kind of flying blind here into the report because the company just no longer gives that sub growth guidance? It doesn't give that sub growth guidance because they're trying to get people to care less about subscriber growth. Obviously, people still care about subscriber growth. But I think this is going to be an interesting quarter because it's really about the guidance and the outlook. And I'm not talking about just the number of subs they say they're going to add in the second quarter because they're not going to really give a hard number there. What I'm talking about is what the potential is for the crackdown on password sharing. How has it gone so far in the few markets where it's rolled out? When will they be launching it here in the U.S. and other really

essential, really big markets? We don't have a date yet. And then, of course, the ad business, they've given some hints. They've said it's been off to a slow but a good start. But how is it actually doing? How much revenue is it generating? And how big of a year will advertising have for Netflix? Is this going to be a really big year for advertising or is 2023 still going to be a starter year for their ad business? So I think this is a year, this is a quarter where analysts are going to be really pushing for insight, not just into what to expect this year, but beyond in terms of what does this company look like down the line? All right. You ask all the right questions and I think we'll get

the answers in about an hour, as we said, and we'll see you then in overtime. That's Julia Borsten joining us with the setup. Now let's bring in Anastasia Amoroso of iCapital and Keith Lerner of Truist Wealth. Welcome. It's good to have you on as we, you know, we walk up to this report, which maybe matters more than, I don't know, it always matters. But given what tech has done and comm services to start the year, I would assume this better be good. It better be good. It better not disappoint. But I do think the silver lining here is that think about how many tech companies

either suspended guidance altogether or they had a negative preannouncement or the analysts took down their earnings estimates. And, for example, if you look at communication services, if you look at Infotech, the earnings estimates for this quarter are negative 15%. So I think that's a very low bar, but companies like Netflix better surprise to the upside. Now, I think the scope for surprise is there because, Scott, we talk about how economic data has been continuing to surprise to the upside. I think consumer may also surprise to the upside. We saw the retail says last week that was sort of bad.

But once you dig into the details, guess what was strong? Consumption on food and beverage was strong, but also online retail was strong as well. And overall, consumers are prioritizing leisure, entertainment over durable goods. I actually think that bodes well for parts of tech. You're not positive on most parts of the market, Mr. Lerner. However, technology is one of the places you're actually overweight. It is, but I'm not actually super excited about it. So that tells you why we're not super excited about the market at this level.

So I think with tech, they have some levers right now, right? This is the year of efficiency, and we're seeing that they're pulling that lever. So I think these tech companies will continue to outperform on a relative basis. The challenge I see is that you're trading at a 30% premium for the sector relative to the broader market. So the question becomes, how far can tech take this market by itself? We actually just looked at some interesting data. Over the last three months, only about 26% of stocks within the S&P are outperforming the S&P. So what does that tell you?

Well, tech has been the driving force. Top heavy. It says that this whole thing has been top heavy since the start of the year. You need this to burn out. And maybe that's the glass half full that you have opportunity to burn out. But in our view, if you're already trading at one of the highest valuations in the last 20 years for tech on a relative basis, where's the big upside for this market going to come from? Do you feel like tech's vulnerable here? I mean, I don't. And the reason I say that, yes, you know, maybe the multiple is higher on tech and higher on, you know, the Nasdaq than

it is on the S&P. But I think there's two differentiating factors for technology. First of all, look at margins. Who has the highest margins in the S&P 500? It's technology and software. So there should be a premium in valuations for that. And then the second point, if you look at the earnings CAGR, the earnings growth for the next two years, for example, Scott, for the S&P, it's averaging about 8%, which may be high. But guess what? For the NASDAQ, it's about 14%. So it's all about how much you're paying for a unit of growth and for the margin. And I think the story there is positive for tech. And then the other thing, too, is I do think we're towards the end of this hiking cycle. And that means this valuation headwind may not

necessarily be a tailwind, but it's not going to hopefully move the multiples one way or another. And in that environment, if tech multiples are stable and earnings growth actually outperforms the S&P, I think that's a good setup. Bostick was on our network, Rafael Bostick, Atlanta Fed Prez earlier today. Keith said, my baseline, one more hike for sure, and then we're going to hold it there. And he doesn't have recession as his base case either. What do you make of that? Well, first thing, I think there's a lot of debate whether they're going to raise one more time or not. I don't think that's that important. I think the bigger picture is the end of the tightening cycle is near. And then the question becomes, historically, what comes next? Historically, you get a bit of a short-term rally. And I think

that's part of the reason why this market has rallied. Wait a minute. Why are you negative then? Well, because as we go into the second half, part of the sustainability of a rally is whether you're going to recession or not. I know there's a lot of debate, soft landing, hard landing. We think the economy is going to slow in a meaningful way by the end of this year. And then when I look at the earnings side of this market, we talked about multiples being relatively high. I see a disconnect. I see that the industry analysts are expecting earnings for the S&P in the back half to come back to an all-time high. But I look at the economists, and they're looking for a significant declining in the economic growth. So I think there's a disconnect.

I think you don't have to be bearish, but at a minimum, that just tells us, our view is that the upside is likely capped. I realize the one positive right now is position, and it's still relatively light. So that may stress things a little bit, but if you're looking like we are, the next 6 to 18 months is not something that we feel like there's a lot of upside in this market. Well, I mean, it makes perfect sense to be bearish, though, if you believe that earnings are still too optimistic and that estimates are still too high. Like Mike Wilson, for example, at Morgan Stanley, has been routinely bringing up, including again this week. And I don't even think you have to be overly negative on earnings.

If I say that the earnings for the next year are money good, which I think there's actually a downside, you're still trading at the highest level of the S&P over the last 30 years outside of two periods, the pandemic overshoot or the technology bubble. So you have to really, at this point, to be positive, you have to assume one of two things. One, we're going to trade at those higher valuations that we've only seen twice, or that our earnings are going to be much stronger than the consensus. What about soft landing? Does that make a difference to you? Because it doesn't make a difference to everybody, right? Marco Kalanovic, JP Morgan says even with a soft landing,

we could still go down 15 plus percent. I mean, that's one call, right? But what I look at is I look at multiples and they're 16, 17 times. I mean, that is one call, right? But what I look at is I look at multiples and they're 16, 17 times. I mean, that is not that rich if you think the Fed is going to pause and if the economy is cooling and not cratering. That's not that extended of a multiple. I think in order for us to see the downside that maybe we're talking about 15 percent, we need to start to price in a recession. That needs to be a lower multiple. I should correct myself, too. He's talking about it. Even if you have a very mild recession, you could still go down 15 plus percent. But the point being that in his view, the market's going lower. And that's an important

distinction. If we do, in fact, have negative GDP growth, if we have to price in a recession, that's right. Sixteen, 17 percent times multiple is not sustainable. But we're not imminently heading there. And, you know, the other thing to come back to earnings, you know, yes, it's true that consensus was looking for $248 on the S&P 500 earnings for 2024. But guess what? That 248 number has already been cut back. It's like 220. Well, that's for 2023. But whether you look at this estimate, this year's estimates, if you look at next year estimates, we've already seen 10 or maybe more percent cuts in earnings estimates. So I actually think the bar for earnings has been de-risked quite a bit. And the other point I would say,

Scott, it's really difficult to kind of project what the market is going to do three, six months from now. You know, we really have to see. That's why you guys get paid the big bucks. Well, that's why I'm focused on the next month. That's why I'm focused on the next couple of months. And the data that you can see in front of us, the data that I see today, it's a cooling economy, not a cratering one. Yeah, I mean, three to six months, who knows what the market outlook is going to be. But if I told you that the consumer holds up, earnings remain better than feared, and at the May meeting, the Fed gives you the, you know, even if they don't explicitly come out and say it, but they lead you to believe we're

done, do you become more positive? I don't know that we become more positive. I think what will happen is if we don't have a pullback, I think this market's going to slog around, you know, choppy nature, and I just don't think you're going to see like a really great opportunity. That may happen. Markets can correct in time or in price. But to your point, if all those things happened, I think that because of position and we would have an overshoot. But even if I use optimistic assumptions for next year, it's hard for me to see this market in a really optimistic scenario above 4300. The further the further, though, that we get away from the October low, it's like, OK, well, here's another month that we got away from it.

And then there's another month. I mean, at some point you say, OK, I've seen enough. Well, I don't think I'm going to call this race. I don't think you need to call that the October. I don't think you have to say we're going to have to break below that. That's still 10 percent from where we are today. And I think also it's curious when I look at the data. Normally, by this time of a bull market, you're up about double for the S&P. Normally small caps are leading. Normally financials are leading.

We're not seeing any of that today. And then you look year to date, the average stock is up about two or three percent. And then I know we're up eight percent this year. But if you go back to mid-December before we corrected, we're basically up one or two percent. So a lot of things depend on where your starting point is. Anastasia, last quick word to you. I mean, I think it's been tough to be a bear in this market. And the reason that I think- There's still plenty of them, though. There's plenty of them, and maybe that's the good thing. That's why we haven't tried to be a bear, because there's so much negative sentiment out there.

As long as this economy hangs in, and as long as the Fed is approaching a pause, I think you still have a phase in the market where the stocks can do okay. So I don't want to pre-trade a recession. And for now, sticking with dividends and sticking with tech. All right. Well, we've turned positive across the board, if that means anything, at least for the Dow and the S&P. I see the Nasdaq is still a touch negative as we wait for those Netflix earnings in overtime.

Thank you very much, Keith and Anastasia. Talk to you soon. Let's get to our Twitter question of the day. Speaking of Netflix, what is the best streaming stock right now? Is it Netflix, Disney, Warner Brothers, Discovery or Paramount? Head to at CNBC closing bell on Twitter. Please vote. The results will have them for you a little later on in the show. We do have a big one on deck, though. Up next, an exclusive with Bank of America CEO Brian Moynihan. He talks earnings, the state of the banks, consumers, the economy and much more.

And later, former J.Crew and Gap CEO Mickey Drexler is here at Post 9. He breaks down the current state of retail, the health of the consumer. Do not go anywhere. You're watching Closing Bell on CNBC. Bank of America reporting a beat on the top and bottom lines today, driven in part by a 25 percent rise in net interest income and better than expected sales and trading revenue. Our Becky Quick joins us now for an exclusive interview with Bank of America chairman and CEO Brian Moynihan. Becky, over to you. Scott, thank you so much. And I want to welcome Brian Moynihan. Brian, earnings very strong across the board. Scott just mentioned a lot of the numbers. I think it was the net interest income that had so many people kind of watching and wondering what happens next. Those numbers are strong. It means that you can get deposits paying out very low amounts of interest to people, but you give out loans at higher rates.

What are you seeing just as we get deeper into this towards the end of the quarter as things change so much with banking, is the net interest income, is that a number you think can continue, or how do things change and how they shape? Well, at the end of the day, it's good to talk to you again, Becky, and thank you. The team at Bank of America had a great quarter, $8 billion plus in earnings and 17 percent return on tangible common equity. And we did it by growing loans year over year and having deposits stabilize. As the Fed has withdrawn monetary compensation, QT, shrinking their balance sheet, everything your colleagues were talking about before, the money's moved off the bank balance sheets out of the system, but our deposits set up relatively well.

And I think even through the, in March, even through the changes in March in the banking system, our deposits held up well and performed a little bit better than we thought we did. So we had $14.6 billion in the high for the quarter, up 25 percent, as you said. But the real question is, what do we do? We open accounts for people, and they give us deposits, and then we turn around and make loans to people, or we invest the excess. And that's been going on for years. That's it.

It's called banking. And then we have fee revenue streams. And all of them performed well linked quarter, albeit that the pace of rate rises has slowed. So therefore, you're starting to see an eye flatten out. And it was down a little bit quarter. The core banking book more or less flat. And we see that continuing in the future. And we gave some guidance today that it would be down a little bit next quarter. But we feel pretty good about it. You said today that you're anticipating a mild recession at this point, just based on what you're seeing with the consumer, which still looks strong, maybe a little bit of a slowdown when it comes to commercial issues,

commercial loans. But is that dependent on the Fed slowing things down after this next rate hike that's anticipated? Well, we base our earnings on the market. The market has one Fed increase left in a forward curve and then has cuts. Whether those come true or not is really going to be dependent on what the Fed sees after they at each meeting, because they're completely driven by trying to figure out what's going on in data. Our team, Candace Browning Platt and the research team, have a recession and have consistently

had a recession predicted for the second half of this year, third quarter, fourth quarter, first quarter of next year, and then ends, and we start to see positive growth. And so that's based on the Fed tightening having finally taken hold, and those experts see that. When we look at our consumers, though, you can see the core conundrum in the face of the Fed. Our consumers spent, you know, 9 percent more in March of 2023 than they did in March of 2022. They spent about 8 percent in the first of 2023 than they did in March of 2022. They spent about 8 percent in the first quarter, more than they spent last year in the first quarter. And they're spending on things, frankly, which drive employment, meaning they're spending

on experiences at amusement parks or theaters or restaurants or outside concerts or outside entertainment. All these things drive people to make them happen, as opposed to other things, buying a product which would come from another country potentially. So U.S. employment is very strong. So our customers are seeing wage growth and seeing wages. And they also have money in their accounts, still a lot of stimulus money left in. So that's what the Fed is trying to slow down.

And albeit I think we see and our experts see them having a mild recession, which if they could do that and unemployment never got much above four and a half, that would be a heck of an accomplishment. And so that's the base case. And we are running a company accordingly. You know, deposits were down just slightly, but you're still talking about deposits up over $500 billion from what they were pre-pandemic at the end of 2019 or going through that. You and I have talked a lot in the past about deposits being sticky. Are they still going to be sticky? Because one thing we've learned during the

issues the banks have been having recently is that people are willing and able to move their money pretty quickly electronically. Yeah, I think if you look across our customer base, deposits is a great big word. And there's 1.91 trillion of them at Bank of America. It is up $500 billion or more since pre-pandemic. And you'd say, well, is that going to go back out? And the answer is the economy on a gross basis is up a lot also. So the industry's deposits are up 31 percent.

Ours are up 34 percent. We have gained share during the pandemic and its aftermath. And that's by opening up. Since the pandemic started, we've opened up two and a half million net new checking accounts in our consumer business. Our wealth management customers opened up 25,000 or so bank accounts last quarter, the first quarter this year. We just keep deepening our relationships and driving it. That means our deposits are inherently sticky because different customers are using the cash for different purposes. If you're a core general consumer in our consumer business, your money's

coming in and out of your household, you're paying your bills, et cetera. If you're a wealthy customer, when cash funds were basically getting zero and there was nothing to do with the money, you just left it sitting at the bank. When cash, when a money market yields a direct treasuries went up, you move some out. We expected that to happen. Matter of fact, we did it for the customers. That's the way it works. And then when your corporate customers, the same thing, and there's even some tedious stuff in there called earnings credit rate and things like that. But basically, companies pay us for their services by leaving deposits with us. If we raise that rate, they can leave less deposits. Now, interesting, those deposits have been relatively stable the

last six months. So each customer base, each who it is, what they do with the money, investment cash versus transactional cash is very different. But at the end of the day, $1.91 trillion of deposits have been relatively stable the last six months. We showed some detail to that. And, you know, we feel very good about that. Given those deposits, we make loans and serve our customers that way. Hey, Brian, Warren Buffett said that he expects more bank failures, but he also said that he doesn't think any depositor is going to lose a dime in any of this. How would you kind of sum up how you see things shaking out with the turmoil in the banking business lately? Well, I think our industry has great capital, great liquidity, is managed well.

And so if you look at it, you know, the FDIC insurance ensures that depositors don't lose their money underneath the insurance levels. Typically, when a bank fails, all the deposits are bought by an acquiring bank. There was a little bit of difference in the March things where they had to make some systemic declarations. But at the end of the day, you want the depositors to go on and conduct their daily business while the shareholders and debt holders take a hit, and that's what happened. The key that we have to remind everybody is we pay for all that. And I mean, the industry pays its own way in terms of the insurance. The government guarantees it, but the industry reimburses the government for that. That's one of the reasons why our expenses were up this quarter. We had an additional $100 million in deposit insurance costs.

It had nothing to do with what went on in the first quarter, but they were scheduled to go up. And so I think we feel very good about this industry. It's well managed. The business models that were challenged early in March were very different than the banks, the regional banking system and stuff. And we've seen the stability coming system. And that's a very good thing for America, quite frankly, because the strength of our banking system is one of the things that holds us in great stead all over the world. Brian, unrealized losses on hold to maturity bonds. You brought that number down from $108 billion three months ago to $99 billion now. That's a big number.

Obviously, it's nothing compared to the deposits you have, not going to be an issue in terms of being able to hold those things to maturity. But how does it impact profitability earnings-wise for the company? It really doesn't. We also showed today that the rates on our trillion dollars we have to put to work every day because we have $1.9 trillion plus other cash from debt and other things to put to work. We only have a trillion of loans. It goes into cash, AFS securities, held to maturity securities. You look at those things as on average, they keep going up each quarter. And people say, how could that happen if they're fixed rate? Well, a lot of it's floating rate. A lot of it was fixed rate stuff hedged. And so that keeps marching forward. So at the end of the day, we had 25 percent more net interest income last

year's first quarter, this year's first quarter. We held up better than we originally planned. We thought we had $14.4 billion. We were at $14.6. But it's the way you extract the value of those deposits. And so we quit investing in the held to maturity in mid-2021. And it's just been running off. But that was a plan. Once we figured out the deposits were going to investing in the held to maturity in mid-2021, and it's just been running off. But that was a plan. Once we figured out the deposits were going to stay in the industry because of the stimulus and the things that went on during the pandemic, we then had to invest them, even when short-term rates were zero, to produce some revenue. Otherwise, we basically were running the business for no profit. And then we did that, and then we let it run down.

And, you know, $8 billion after tax is a pretty good quarter. Yeah, it is. It is. Brian, I want to thank you very much for your time today. Brian Moynihan, Bank of America. Thank you, Becky. Thank you. Scott, we'll send it back over to you. All right, Becky. Thanks very much. Our thanks to Brian as well. Up next, retailing legend Mickey Drexler joins me right here at Post 9 to get his forecast for the retail sector, where the consumer could be heading from here. Inflation, too. He's got a good read on that. That's right after this break. Closing bell right back. Quote, it's tough out there. Those are the words of our next guest who knows the retail landscape better than most anyone. Mickey Drexler is the former CEO of J.Crew and Gap.

He's now the chairman of Alex Mill, alongside his son who founded the business. Mickey here with us at Post 9 in a CNBC exclusive. Welcome. It's good to see you. Nice to see you. So it's tough out there, but yet you still wanted back in this game? Well, it's what I love to do. Passionate.

I could never sit and do nothing. I was helping other people when I left J.Crew. I was bored out of my mind. And I like to operate and create and, you know, and work with people and teams. I mean, it's an interesting time, to say the least, you know, when you came back to do this, where it's still in the pandemic, trying to figure our way in what the future of retail is going to be. How do things look to you now? Well, you know, I look further out. I got very emotional about the name, Alex Mill.

And I love names that are good. Old Navy, named after a bar in Paris, Madewell, the defunct name that I bought from a company that was out of business. Then you kind of build your imaginations around that. But I think it's going to get tough and it should be tough. There's too many of us around. And now it's particularly tough. I know for us, we're like this, but we're up against post-pandemic great year. And so now our comps are tough now. I speak to a lot of people out there. There's some, you know, winners and more people who are concerned. And it's just tough for other reasons, too. When you say there are too many of us around,

you mean there are just too many retailers of course yeah still oh well that's yeah still well because it's been tough for the last well i don't know how many went out uh but uh you know for years they were saying i don't know what this means you know they're this many square feet in uh in america and the rest of the world has much less per consumer of retail. And now it's online, too, of course. Is it good being a smaller player like you are? Or are there pitfalls against that, too? I mean, you're competing against the deepest pockets around.

Well, you know, it's a good question. But I always say, but small is the new big. And I was a deep pocket for a number of years. And it was easy because we had a bank at Gap and we had a bank at J.Crew. And here it's we're owned by all of us, options and equity, because, frankly, I'd rather do it without a lot of opinions, except for the people who are investors who I know and trust their judgment, their instinct. And that's my board of directors. I go to whoever knows more than me about a subject. Would you also rather do it without a lot of locations? I mean, does that make a difference? No. These days, too? You're a more direct consumer.

Yeah, well, you know, look, I've been doing that for 40 years. And there's others, you know, but everyone, DTC is the new, everything's like a new thing. You know, AI and all that stuff. You know, I would like to have enough stores that get our name out there. Our biggest challenge now is no one knows our name because we don't have a big budget at all because, you know, we write the checks. And when we're ready, we're going to go out there. But right now, we're going to do, look, if you don't create, you don't go new, then you fall backwards. And I think there's a big opportunity in America for more creative. I think our marketing, like most, is kind of almost commodity.

Here's the style, here's the email, here's Instagram, and here's whatever else is out there. Well, I was thinking, is it better to have a killer product or a killer marketing machine these days? Number one, to me, killer product along with marketing, public relations, a really nice company with people who care. But I think you can't, we might get known if we had a tipping point. My other companies, we have big budgets and extremely creative,

in my opinion, looking back. Is now a great time or a horrible time for fashion? Just I'm thinking about the pandemic. You come out of the pandemic. We're still fighting with ourselves over how much we want to go to the office. It's kind of anything goes. So I would think that's negative. That's positive for a fashion standpoint. You kind of do whatever you want. But if you're not going to the office, it's maybe more negative because anything goes. You can be so casual these days. It doesn't really matter. Don't get me started with not going to the office. OK, maybe I'm old fashioned. You're going into the office

kind of guy. Oh, spontaneity, mentorship, creativity, social and, you know, being close. But, you know being close but you know remote people can do that etc I think that first of all I don't consider us necessarily in the fashion business

we're in the business of style taste and whatever it would be that's what I would want to do and it happens to be things you can wear. I find, personally, and I, you know, this is my opinion, that when I look at the clothes out there, especially the fancy clothes, I don't understand. I never seen one looking like that. The prices to me are, you know, whatever. I mean, you've got to take a mortgage out.

Now, the handbags, and if you look at it, you know, Gucci, Hermes, whoever else, Chanel, I mean, that seems to be one of the biggest status symbols out there because you can afford to buy one. As you say prices, what about literal prices at stores these days in terms of sales and where inventories are, where inflation is, and where you're sourcing your cotton from and the rest of your

fabrics? Is it still as bad? No, not cotton and all that. But today, what was the first question? I always go off on a tangent. Yes, what you're seeing, you know, on the ground now in terms of inflation, pricing and discounting, because inventory, bloated inventory has been such an issue.

The only thing that's gotten lower in inflation is the press. Look at the prices around concert tickets. You know, Bruce Springsteen, who they wrote, I love Bruce because he's one of the guys, but food, you know, subscriptions, whatever, cars, daily things.

It's still inflated, so maybe it went down 6%, but, you know, it's down 90% or up 90% from two or three years ago. And I speak to, you know, I schmooze a lot of people I ask. And they tell me, you know, I work only with 25 people. We have a bullpen, like you do in the finance business. But I think it's tougher. Sale, you mentioned, it's integrity of a business. I call it shopping mall bingo. Oh, I paid 50 today and now it's 39. If you go online, you know, people say, it tells you the story of every company. I am, look, we had too much sale in my day. And at Alex Mill, I wanted to build with the team a nice company that has integrity.

And we have a July sale and a sale in December. And that's it. Now, we don't have the resources of the big pockets. But, you know, it's a tradeoff. I mean, you know, you have to be optimistic in my world. Look forward. Have vision. And that's what keeps me going every day. I don't like, you know, losing a bit of money every year

because, you know, we're small and not really capitalized that well. But I think we have a great future. When you do look out into the big picture, besides yourselves, obviously. Who's doing it well? Who do you think is doing it well? I never mention that sometimes I get into trouble. There are a few winners out there. See, I'm not asking you to criticize. I purposely asked you it that way, because I knew you're not going to sit here and criticize.

Well, I'm much better at criticizing than, in fact, you know, there's something not to change the subject. I like quotes lately. And a lot of people don't understand me in a sense. And I say, don't praise me, criticize me. And I always tell people I'm walking around to see what we can do better. And I expect what we do well. I don't say, oh, great job.

We're all expected to pole vault higher. and I expect what we do well. I don't say, oh, great job. We're all expected to pole vault higher. I don't know if you know the rules of pole vaulting, but you've got to keep jumping until you fail. Who set the bar up high then to use that? Well, you know the start when you win. This is a director, Josh West, in the J crew. He ran a great company for a million years, ADP, and he explained that the board meeting, if you...

What? Your microphone's about to fall off. I didn't want it to hit the floor. There you go. So he explained pole vaulting rules, and it's jump, You win the competition. You keep jumping until the stick or whatever it's called falls down. That's what we do. Would you be an investor in a publicly traded retail company today, given how concerned you are about kind of where we are?

You said there's too many of us, implying that some need to go away. I'm not a good investor in stocks. And when I do retail, I fall in love with the potential business thinking if it's run this way. And so you're really investing in leadership in every company, in my opinion. Oh, you said you had a really interesting quote that I saw. Inventory is a temporary problem. Leadership is a permanent problem.

Well, I said that. I like that. You said that. Well, leadership, it's wrong. Well, I mean, there are good leaders out there in the retail business. Oh, there are terrific leaders. Yes, there are, who I admire and respect. The list is not long enough for me, but I'm a fetch. My standards are what they are.

And I always like to look up at people. And I learn from anyone, not what to do, to do. But, you know, I know all of them. And, you know, look at their stores or their online. That's a reflection of the leadership. And the other reflection is I always review my team members from bottom up. Who knows better than who's a great leader than the people that work for them and are motivated by them? Let me ask you one last question before I go.

You're no longer on the Apple board. No. But when you look at the whole retail experience, when you go into an Apple store these days, what do you think? Well, I had something to do with the original store. I love Steve, by the way. In my opinion, he was the best ever. And I say the best retailer ever. What do I think?

You know, I'm not a technology person. I don't even know how to work this computer. I do iPads and iPhones. But look, I think when a store is that big. Look, iPhones are a monopoly. So I think I wish I had something that was a monopoly. But he's incredible, and Tim's doing a great job. It's a great company.

You're still a shareholder in Apple? Yeah, a little. Not, you know, did well with it. I'm sure you did. I mean, 1999, you know. I'm sure you did. I'm sure you did. That's why you are who you are.

Thank you so much for being here. Thank you very much. All right. That's Mickey Drexler joining us here exclusively on Closing Bell. You sit tight for a sec. All right. Still ahead. The key names you need to be watching as we head towards the close. And we are less than 30 minutes away from Netflix numbers. The key themes every investor needs to watch. That's up next. Got about 15 minutes before the closing bell. Let's send it to Pippa Stevens for a look at the key stocks we're watching today. Pippa. Hey, Scott.

Well, Boeing is in the green as CEO Dave Calhoun said the company plans to stick by its target to increase production of the 737 MAX. That comes after Boeing last week disclosed a problem with the fuselage in some of its 737 MAX planes, saying that could lead to reduced deliveries. But at the company's annual shareholder meeting today, Calhoun said the issue will not impact long-term guidance. NVIDIA also in the green following a double upgrade to buy at HSBC. The firm saying NVIDIA's AI opportunity more than offsets prior concerns around a data center slowdown. Shares up more than 80 percent this year. Scott. All right. Good stuff, Pippa. Thank you very much. That's Pippa Stevens. Last chance to weigh in on our Twitter question of the day. We asked,

what is the best streaming stock right now? Netflix, Disney, Warner Brothers, Discovery or Paramount? Head to AdCNBC Closing Bell on Twitter. The results right after this break. Let's get the results now of our Twitter question. We asked, what is the best streaming stock? Right now, the majority of you said it is Netflix. Reporting shortly in overtime, 54.4% Disney, number two. We said Netflix getting ready to report. We'll have a rundown of what to watch coming up next in the market zone. We're now in the closing bell market zone.

CNBC senior markets commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Peter Cipino of Wolf Research on the questions he wants Netflix to answer when it reports in overtime in just a short period of time. Mike, to you first. I feel like kind of the market's waiting around for these kinds of names to deliver and see if they actually do deliver. That's for sure. And it may not just be about the big growth stocks, which, yes, have had an outsized kind of role in driving the market higher. But, you know, S&P X tech, I was just taking a look, is up 5 percent year to date. It's up 2 percent this month. It's still the bigger stocks. It's the ones that people know and have an attachment to. So, yeah, we're waiting around

to see if the fundamentals can give us any different complexion of this market. Because right now, it's been about, OK, the Fed's just about done. The macro is held together. And that's been enough to feed off a very negative sentiment of positioning to this point. Big question tactically, does the market give you a chance to profitably sell the same level a fifth or sixth time in the last 10 months, which is right where we are right now, 4,100 to 42? Or is there going to be an overshoot attempt? Do you have an opinion of a VIX that is 1681 as we speak? I have a few opinions, one of which is it simply reflects

the market we're in. It's been rotating. It's not been falling apart. It's been in a narrow range. Even that said, it's getting a little compressed. Just before I came on here, took a look at the 10 and 20 day actual historical volatility of the S&P 500. That equivalent VIX is right here. It's 16 and change. Usually there's a little bit of a margin between the spot VIX and that. So, yeah, it's saying that people have not found it to be particularly profitable to buy protection in this area. That said, if you look at the VIX futures, June is above 21. That's only two months away. July is above 22. So when you have that kind of shape of the VIX curve, it means it's a kind of a normal market, so to speak. We'll see if the fundamentals and

the macro can redeem that view that we're in a more normal market that's rotating around danger and is basically in a more comfortable spot. All right, Peter, you have a laundry list of sorts of what we need to watch out for in overtime tonight with Netflix. What's towards the top of that list? Well, Netflix, the subject that's on everybody's mind is the company's transition to build new revenue streams. Advertising is the biggest one

and the one we're most excited about. And the most high top of mind one is the paid sharing initiative, the effort that Netflix has begun in certain countries to squeeze revenue out of the people who use other people's passwords to watch the programming. You know, you're not getting sub-guidance anymore. How does that shape how you model what this should look like in a matter of moments and then how the stock should trade as a result of it? Well, despite a lack of formal sub-guidance, the company did help Wall Street formulate some general expectations for the quarter, and people will be watching the subscriber report closely. I think as Netflix matures, subscriber growth matters less and less. I think of the Hollywood incumbents who had for many years did not report the count of subscribers that they had in the pay TV ecosystem. The market focused on subscribers and pricing and globalization and new products.

And Netflix is really heading in that direction. But it's a long, slow journey, and net ads still matter for this stock. You don't like much in this space, I mean, in terms of the names in your coverage universe. Warner Brothers Discovery, though, pops out as the one you like the best. It's a really tough space. The secular trends for the Hollywood incumbents are well reported on, and they're just as bad as the headlines. And in the meantime, Netflix is a secular winner at a relatively demanding valuation. We're a believer in the

long-term compounding opportunity there. Warner Brothers Discovery to us is leading the change in the industry. There's this transition that's incipient from the land grab mentality of the last three years or so, in which everybody in Hollywood was fighting for their lives, trying to recreate their share of television in the streaming ecosystem. And Warner Discovery has really stopped the land grab, and they're focused on generating cash flow and paying down debt. And we think that the self-help opportunity at WBD is very compelling. All right, Peter, thank you. I appreciate that. Less than two minutes to go now. You heard the sound effect. Back to Mike Santoli for his last word. I mean, no real landmines from the banks. So we're kind of through that. And earnings by and large have

been pretty decent. They've been OK. It's definitely early. And earnings by and large have been pretty decent. They've been OK. It's definitely early. And I think almost a bigger issue is that the earnings decline in terms of the trajectory of the estimates has been orderly. And it's been well telegraphed and nobody was expecting big things. That's been enough over the last couple of quarters to keep the market together as we got reporting season through. Again, valuations in themselves are not compelling. The risk reward at the upper end of the range probably doesn't look as good as it did, you know, 10 percent ago. But, you know, if we're getting into the second half of this year and all of a sudden 2024 numbers don't look delusional as they're published right

now, then the market can make its way again if the Fed is done. And you still do have this pretty high tank, this full tank of anxiety out there in the way of people piling into cash. Fed speak didn't do much to upset anything today. Bostick was like, yeah, one more done. Yeah. Leave it there for a while. But, you know, I will have seen enough at that point. It matches, pretty much matches where the market is right now. It's going to get above 5%. They've been targeting that level for a little while. We're a couple of weeks away,

but it seems like the data is going to essentially underwrite that notion that done soon, then we see what the net damage is. All right, game on in overtime. Netflix, that report is literally just moments away. Morgan and John pick up that story right now at Overtime.