Closing Bell - Closing Bell Overtime: First FANG Report in the Books 1/19/23

Episode Date: January 19, 2023

Netflix reported results in Overtime – that stock initially popping on the numbers. Shareholders Jason Snipe of Odyssey Capital and George Seay of Annadale Capital give their instant reaction. Plus, top technician Mark Newton from Fundstrat is raising the red flag on one key part of the market. And, Hightower’s Stephanie Link breaks down the key earnings reports she is watching next week.

All right, Mike, thank you very much, and welcome, everybody, to Overtime. I'm Scott Wagner. You just heard the bells. We are just getting started from Post 9 here at the New York Stock Exchange, and it is about to get real because we are mere seconds away now from the first FANG earnings report of the season. Netflix about to hit the tape. We're going to get you the numbers and the stock move as it happens. The stakes, as you know, could not be higher.

Given that stock's big bounce back and the Nasdaq's nice jump to start 2023. Our Julia Borson is standing by. We are going to go to her in just a few moments and we keep our eyes peeled on that chart. We begin, though, with our talk of the tape, the early year rally, whether it is out of gas. Let's ask Adam Parker. He's the founder and CEO of Trivariant Research and a CNBC contributor. It's good to see you here at Post 9. We're going to get to the market more broadly in a minute. But what do you think is riding on this now? The first FANG report, NASDAQ's had a nice move to start the year. Yeah, look, there's been some bellwethers reporting. And, you know, people have been asking about Procter & Gamble, you know, things that have a broader reach.

And I think Netflix is one of them. People understand consumer health. But I think the expectations are not that low. So we'll see. Not anymore, because the stock's up like 30 percent since the last earnings report. And maybe 60 cents lows and maybe trades at 75 times 2023 cash flow. And so there's the part, you know, people need to believe this is not what they thought a year ago was kind of a work-from-home stock that over-earned. Now it needs to show a growth rate that's accelerating. Do you believe the bounce back that we've seen in tech? Because, I mean, this was like left for dead last year along with some of these other big names.

And then they were able to rally back to start the year. There's a lot of skepticism around that, though. Yeah, look, you saw our year head outlook. Our view was, well, if everyone thinks it's lower first and higher later, we'll take higher first and lower later because speaking of higher first and whatever happens later, Netflix, obviously, as you can see here, is jumping as the earnings are out. Julia Borson, as I mentioned, going through it as we speak, you're going to hear directly from her in just a matter of moments. But the street seems to like at least what is on the surface here. The stock's up near 8 percent. Actually, Julia is ready now. So, Julia,

this looks good, at least in front of me. What do you see? Yeah, I'm just going to dive into some of the key numbers here. First, I want to point out that paid net ads coming in much stronger than expected. 7.66 million versus the 4.57 million, which is the street account estimate, and the 4.5 million that the company itself had forecast. So big beat in subscribers. Earnings missed by quite a lot. The company reporting 12 cents in earnings per share versus the 45 cents that was estimated. Revenues right in line with estimates at 7.85 billion. The other thing I need to point out here is there's been a change in management. Reed Hastings was the original CEO. He became co-CEO with Ted Sarandos, and now he has become executive chairman.

So Reed Hastings leaving the co-CEO role, becoming executive chairman, and co-CEO Ted Sarandos is now joined by a new co-CEO, Greg Peters. So this is a management change, not entirely unexpected, given that co-CEO transition that Hastings did with Sarandos. So it's sort of maintaining the through line there.

And he's certainly going to be involved as executive chairman. But I'm sure we will learn about that more on the earnings call. I'm going to continue to dive into this earnings report here. But I think the main source of the stock bump right now really comes down to the better than expected subscriber numbers. And just to remind everyone, this is an accelerating growth number for subscribers. Remember, the first two quarters of last year, the company actually lost subscribers. Back over to you. Yeah, Julia, thank you.

And we'll follow it. And I know we'll hear from you again in a matter of minutes. But look at that move in the stock. Let's bring in a Netflix shareholder, Jason Snipe of Odyssey Capital Advisors. Stephanie Link of Hightower Advisors is also with us, both CNBC contributors. Wow. Jason Snipe, your first reaction to, I mean, when Julia said seven million versus the four and a half million that Netflix itself had guided to. I just was like, oh, my goodness. Yeah, that is that is big time, Scott. And obviously, to your point, they guide to four and a half, seven million is a major beat.

You know, I was curious to see about the ad supported tier. You know, I almost look at it as a mid semester report. I mean, they just went live in November. And here we are in January reporting. And those numbers look decent as well. So, you know, I was a little nervous here. The implied move is 10%. Either way, you know, the stock has run a lot up into the print, 30% since the last numbers reported and 18% in the last three months.

But to Adam's point earlier, I mean, this stock is an expensive stock. It's always traded at a premium about 30 times earnings. And with some flat revenue growth, slowing revenue growth and really flat EPS here, you know, it's a little bit challenging. But the other point I want to make here is the dollar. The dollar has decelerated. It's down about 10 percent since its September peak. 60 percent of Netflix's business has done overseas. So I think that's also played well for the stock over the last quarter. You feel like after that dramatic reset, I mean, remember, the stock is 50 percent at this moment lower than where it was. Right. It was a seven hundred dollar stock. It got knocked down in half. Now it's able to recover a lot of that and it's adding some nine to 10 percent back. Even, you know, extending that as we speak.

You feel like we got a brave new world here for Netflix that, you know, maybe investors didn't expect was going to happen? Well, I think there's definitely upside on the ad tier business, right? So that's a $7 a month model versus the $15 a month model. So I think, you know, there's an opportunity and there's an opportunity overseas to get some growth there. And I think, you know, there's an opportunity and there's an opportunity overseas to get some growth there. And I think, you know, that's where we can see continued upside in the stock. Again, this is going to take some time. The other piece for me is the password sharing piece. You know, how are they able to monetize that? I do believe that's going to take some time as well. And, you know, we'll see revenue growth likely accelerate towards the end of the year, you know, back to above 10 percent in Q4 of 2023. So I still like the stock here. I'm holding. I'm not doing much with it.

But obviously, it's a nice move and it's a nice return on the subs here. Yeah. Steph, give me your thought here before I jump back to Julie and I'm looking at just some more of the metrics. I mean, it's seven point six six million versus the estimate of four and a half. They plan to resume their share buyback in 2023. So they seem quite bullish about what lies ahead. Yeah, look, I mean, this is a really good report and the stock is up 76 percent from its lows. So there were high expectations. So the fact that the stock is up in after hours is impressive. Yeah. The net ad numbers. there's no disputing that. I'd like to see what their basic with ad, the BWA metric, the ad tier, like Jason was mentioning.

I want to see what that number was. $250,000 was what was expectations or 5% of total net ads. But there was some thought that they would end the quarter over a million in the in this particular tier ad subset subsegment. So I want to see what that number is. And my suspicion is, yeah, they're gaining some traction there. Right. You're seeing some trade down, but they're getting some traction. So that bodes well. Guide, I think, is kind of mixed. Earnings looks like it's a little light. Revenues. OK. Nothing to write home about. But it all comes down to 30 times earnings for what kind of growth are you getting? Oh, by the way, I'm not that pleased that Hastings is stepping down.

He's a pioneer in the industry. So, I mean, I know he'll still be involved, but I don't think that's really great news. Yeah. Julia Borson has more, in fact, on the guidance, among other things. Julia, what do we see here? Yeah, I just want to give those details of the guidance because the company is guiding to Q1 earnings of $2.82 per share. That's light for the $2.96. That's the estimate. And also, they're guiding to revenue that's pretty much in line, $8.17 billion versus $8.16 billion estimated. But they do say they see modest positive net additions in Q1. So last Q1, they lost subscribers.

This Q1, they say they are going to have a modest addition of subscribers. But digging into the letter here, they do think that there could have been some pull forward into Q4. They weigh in on what they call paid sharing, which is effectively the crackdown on password sharing. And they say that the paid sharing model, which they will roll out broadly later in Q1, so it hasn't fully rolled out yet, will result in very different quarterly

paid net ads pattern, with paid net ads likely to be greater in Q2 than in Q1. So effectively saying things are going to have modest growth in Q1, but then they could increase in Q2. So they talk about borrower households activating their own standalone accounts. So they're long-term bullish on that. But it'll be interesting to see what this all means in terms of the pattern that they're describing, because they certainly had a lot more subscriber additions than expected. One thing that's notable here is this is a company that's trying to take the attention off subscriber additions. They're no longer guiding when it comes to subscribers. Every quarter, they would give subscriber additions. They're no longer guiding when it comes to subscribers.

Every quarter they would give subscriber guidance. They want people to be paying attention to the revenue and earnings. But yet, once again, here we are. And it is that subscriber number that's what's driving the stock now up about 6 percent. Scott. Julia, do we have any idea of the breakout? And I don't know if they've done it or you anticipate that they will. The subs for the new ad tier versus regular.

How should we be thinking about that right now in the big picture? Well, I'm going to go through the rest of this 16 page shareholder letter here. But my understanding is they're going to be talking a lot about how this ad tier is still early days. It's going to be iterative. They're going to start off by making it something that it is now, and then it's going to evolve. Maybe the pricing will change. Maybe the way they deliver ads will change. So they're not going to put it forward as if it's done and set in stone. I have not seen any numbers here in it yet, but I'm going to go through and watch and try to figure out what we have in here about the paid. I'm sorry, the ad support and streaming.

But the other thing I would point out, Scott, is that I think that we may learn more on the earnings call. This is going to be something that analysts are going to be really watching for. But it's not in their best interest right now to be sharing too much about that ad tier if it's not immensely successful right out of the gate. Sure. But I'm also thinking, Julie, about the fact that if, you know, if the sub ads were so strong and you're in such an early stage for the ad supported tier, margins would theoretically hold up really, really well.

If you were still able to add that number of subscribers at full price, quote unquote, rather than a huge mix from ad supported, that would be pretty impressive. Yeah. And what they're saying here in the section on product and pricing, they say we believe branded television advertising is a substantial long term incremental revenue and profit opportunity for Netflix and our ability to stand up this business in six months underscores our commitment to give members more choice and to re-accelerate their growth. They also talk about their confidence when it comes to margins. And they are noting that they delivered on the high end of the operating profit margin target for the full year 2022, saying we expect to increase our operating margin in 2023 versus 2022. So not giving too many details about the ad business just yet, but saying

long term it should be when and could be playing into that margin conversation. Yeah, so far, so good. All right. We'll hear from you again. That's Julia Boorstin with the latest. You want to give me a comment on this? I mean, I think for me, I look at these kind of stocks and I say, what would make me wake up tomorrow morning and want to buy this for the first time or buy it now if I don't own it? And I think what she said is right. You've got to hear what they say on the call and provide more detail. But if I want to be critical, I'd say it's a $150 billion market cap company.

It barely makes money. They missed on earnings. They came in line on revenue. They changed their business model to something that probably is worse for other companies that change. They have a new CEO, and it trades at 75 times, you know, 2023 free cash flow. So, like, I don't, it's not my favorite idea. But you're not intrigued by it, given all those things that you said? We'll see. It looks to me like, you know, when you get these reactions, like half the time they fade and it closes in the red, you know, tomorrow at four. So, we'll see. I mean, it depends on what they say on the call. It looks like the consensus numbers

are for 9% revenue growth or something in 2023. Like, I think there's businesses that trade at lower multiples that have more sustainable business models or maybe less things going on that may be more attractive. So we'll see. I don't have, like, any skin in the game, but I would say, like, I wouldn't, if I were a long-winded portfolio manager trying to beat the S&P 500, I don't think I'd wake up tomorrow with what I know, what I saw, what you just saw, and be, like, super excited about building a big business. No, but I mean, it doesn't this doesn't show a consumer that's, you know, falling off a cliff, does it? No, but again, it's it's you know, it's like one of those like dollars versus market cap thing. Right. If you want to understand the consumer, you've got to look at other things. Don't go to transit credit cards and jobs and wages, which are a million times more dollars.

And I think Jason had a good point. It's a pretty international company. So, you know, I think the bull case is about, you know, everybody Netflixing everywhere. So I don't have like a strong opinion, but I thought we'd get a little frothy. So I was just, you know, kind of, I guess, raining on everyone's parade a little bit. Well, I mean, the stock's here in New York. The stock's coming back down to earth, too. So, you know, the first move is not necessarily the last one. You've got to dig in a little. As we've learned on numerous occasions, Jason Snipe, as I come back to you, let's not gloss over the Hastings news either, which, you know, Steph, you know, says pretty clearly she doesn't think that's great. Now, you know, irrespective of the fact that he's staying around as chairman,

it still is Reed Hastings no longer as the, you know, co-CEO. Absolutely. And that, you know, I'm not really excited about that news, you know, because obviously from a leadership perspective and an execution perspective, I mean, Reed has played a tremendous role at Netflix since the onset. So for me, you know, it could weigh on the stock. I think there's also some perspective for me just, you know, I don weigh on the stock. I think there's also some perspective for me. Just, you know, I don't think Netflix serves as a proxy for anything in particular. But, you know, as I think about the consumer, you know, and all the conversations we've had about weakness on the consumer,

and we'll have to get some news on the call, as you mentioned earlier. You know, what is the dispersion between? Is this trade down, you know, or is this new, real new net ads? And I think that's what we'll find out, you know, in this trade down, you know, or is these new real new net ads? And I think that's what we'll find out, you know, in the moments ahead, you know, in the next couple hours, I should say. We'll jump back to Netflix in just a minute as we are really transfixed by that stock move on that sub number. But let's get a news alert now on Nordstrom. It is falling in the OT. Seema Modi has a story and not a great one. Not a great story there, Seema. Not a great one, Scott. Nordstrom revealing net sales decreasing 3.5%

for the nine-week holiday period. Nordstrom racked the banner, decreasing 7.6%. Eric Nordstrom, the chief executive officer, saying the holiday season was highly promotional. Sales were softer than pre-pandemic levels. While we continue to see greater resilience in certain high-income cohorts, it is clear that the consumer is being more selective about spending given the broader macro environment. So clearly, weaker than expected holiday sales for Nordstrom, a company that's been trying to turn around over the past year, that is sending shares lower by 6% here in after hours. Scott? All right. All right, Seema, thank you. Steph, so I've got Nordstrom's and you can add, what, Macy's to the list,

right, of those retailers who are talking about, you know, taking their numbers down. Lululemon, right? Cream of the crop. Lulu. What do you make of this? Yeah. Well, I mean, it just makes Nike and Costco that much more impressive, right? I think that department stores are in a world of hurt because there is so much competition. There's such inconsistency in product, in high inventories and that sort of thing. And so, yeah, I'm not surprised at all on any of the department stores. And by the way, I also think Target is still going to have some challenges as well, although that stock is down so substantially from its highs, and we kind of know the bad news there.

But I think you've got to be very, very selective in retail. And in fact, I sold Dollar General this morning because I think that it's held up relatively well in the environment that we're in. And I think they're going to struggle as well. It trades at 21 times. So I'm very, very selective in consumer discretionary, but I have been adding to pockets where I think there are opportunities like D.R. Horton, like Wynn Resorts, to Nike, to Starbucks, some special situation story. But you've got to be very careful in this space. Let me ask, you've got some comments? Yeah, I have a couple of comments. One, you know,

both Macy's and Lulu have massive year-over-year inventory growth. So in our year ahead outlook, we said, you do not want to own companies that have built inventory. And I'm not surprised at all. Every apparel retailer is like loaded up to the ceiling with inventory. Macy's and Lulu were two of the biggest year-over-year growth of all. And I think the other thing that you're seeing is the incoming valuation to the quarter doesn't protect them. So stocks that traded seven, eight times earnings, they still go down when they miss. So there's not in the consumer discretionary space, you know, saying, oh, it's cheap, so it's probably OK even if they miss. I haven't seen any evidence of that where you miss and the stock goes up and everyone says, OK, the bad news is in there. So I think you've got to be careful looking at the incoming valuation. I was just looking at what you were

showing there and saying valuation is not really helping me as a consumer. Yeah. Steph, you know, going back to Netflix as we continue to watch those shares and think about what it means for, you know, where where Nasdaq is, where where tech in general is, you know, there are many people who are throwing this gain that we had at the beginning of the year out the window. It's not been believed. The trash of last year, so to speak, has been the early year treasure. What do you make of that? And what, if anything, does this Netflix result do to that?

I don't think it changes anything. I think you're having a little bit of a reversion to the mean because tech and com services just got walloped last year. So a little bit of like a hope trade, if you will, that there's a year to go and maybe that some of these companies can get back into their growth mode. I think it's going to be very challenging. I think you want to stay very selective. I'm not in the camp of owning high multiple stocks. I know you and I had this conversation on Tuesday on halftime that, you know, you didn't think that Microsoft was that expensive at 24 times. I do. I think I think I think 25 times, I think 30 times, 50 times.

Netflix is at 30 times. It's great that it's getting a pop. But I can I see a lot of issues here on Netflix. I mean, the one thing I would say is the theme going into this quarter was we wanted to see revenues accelerate, operating margins accelerate, and free cash flow. And two out of the three disappointed. And now they're telling us that net ads are important when they told us they're not going to really focus on net ads as the key metric any longer. So it's kind of confusing. Okay, fine. It can get a pop here today and tonight, maybe into tomorrow. We'll see. But I think there are other areas, especially within tech, that you can be. I think I feel a little bit better. Semi, semi cap equipment. I'm sure Adam would agree with me on that. I think that there are really big opportunities. They were the first to decline a year ago on double and triple ordering. And I think they're going to lead us out. By the way, I'm looking at a headline that says Costco announces a four billion dollar share buyback.

I mean, since I mentioned the fact that Netflix says they'll resume their buyback in 2023, it's just interesting as some see their stocks as cheap enough to start buying some shares back. So we've done a lot of work on buybacks and generally they fail. If you buy a basket of stocks that do big buybacks, they don't even outperform those that don't do buybacks or dilute. And part of the reason is they do a terrible job of buying. And I mean, if Netflix is excited about it, why didn't they buy it 60% or 78% lower or whatever stuff? So I just don't really think that's always a good use of capital. And, frankly, they don't have that much excess cash. They should be, you know, toting that around.

I thought, Steph, every word you said I agreed with there. And I also agree with Jason from the standpoint of I don't think Netflix is really the bellwether. I get we want to focus on Fang, but I think Microsoft and Google and some of those, they just mean much more than Netflix, which is a little bit more idiosyncratic in the niche business it's in. Do you agree with, Steph, that valuations of large-cap tech are still too rich, like a Microsoft, which you said? Yes. I would generally say that we haven't seen, in my mind, a lot of people throw in the towel yet. There's still whatever it is. I can't look now at what, 52 buys, four holds on Microsoft, and 37 buys and one hold on Now. It's not like there's been, you know, just, you know, I think there's a lot cheaper things that are discounting more negativity.

Even in, you know, things like mid-cap software, which I don't think we're there yet, but I think you want to own companies that grow. And everyone, you know, knows about the stories with Microsoft and Google. So I think there's more downside for some of the big tech on a relative basis. I kind of do. So, Jason Snipe, the last word goes to you and you can take the rally in general because the market's starting to look a little tired now. Oh, there's no doubt about it. And I think, you know, not that I completely chalk up the rally to just positioning in this kind of narrative of the soft landing. I think that's what we've seen thus far. And obviously, growth really struggled last year. And I think as you look to this year and going forward as a Fed

in slowdown mode, but there's a lag effect to a lot of things that they already done from a tightening perspective, whether it be labor or housing or other items. So I think it's really important to take a balance of troats, you know, do your research, you know, and really make sure that, you know, you have names on both ends of the spectrum, you know, from a value to growth perspective. And I think that's how you play it going forward. All right. We're going to leave it there. Guys, thank you very much. Stephanie Link, you'll be back with us for some halftime overtime. Jason, we'll see you soon. AP, it's always good having you here. Thanks for having me. Good to see you. At Post 9, we're just getting started here in overtime.

Up next, we'll have obviously much more on those Netflix results that just crossed. The shares, as you see, they're still higher, not quite as much as they were right out of the gate when the report hit. Still 4% to the upside. Got another shareholder standing by as well with instant reaction to the quarter. What it means for other tech stocks as well. And as we head to break, check out our Twitter question for the day. We want to know, what is the best streaming stock right now? Is it Netflix? Is it Disney? Warner Brothers Discovery? Or Paramount? Head to at CBC Overtime to vote. We'll share the results coming up.

Overtime is back in two. All right, we're back in overtime. Take another look at shares of Netflix still holding on to a nice gain here in overtime. Up better than 4 percent. That after the company reported earnings just moments ago. Joining us now with more instant reaction to that quarter is Netflix shareholder George C. of Annandale Capital. Welcome back. It's good to see you. I mean, for somebody, you got a big smile on your face because you came in neutral to cautious. I see you're a happy man. Yeah, I am. I think that under promise over deliver still works, Scott. I mean, they really they really blew out the numbers and they're getting rewarded after hours on this. But, you know, I've been thinking about this a lot today and I shorted some puts on Netflix at the 180 strike. And I own shares as well. I started buying at 300 and bought all the way down. But I would be a tremor on this report.

And I also was thinking that I believe Netflix may be more of a trading asset than an investable asset at this point. I think that when I, and by investment, I mean something you're going to hold for years and you're not going to pay taxes on, you're just going to let it run. And I think that the multiple on it right now is probably too high and it was probably too low several months ago when it was under 200 bucks. And traders can have a field day with this. I think it's going to yo-yo up and down. Wow. Are you going to be trimming some of your own position? I'm going to hold what I've got because I feel like the position as it is is the right size. And so I'm just going to stick

with it. But I've lost a lot of my enthusiasm for it as a long term investment because I think it's getting expensive again. Some of your guests previously were saying that a lot of the tech stocks are still expensive. And that's exactly right. What was most impressive to you out of this report? Was it, I mean, I don't want to be a master of the obvious here, but was it the subscriber number that is the obvious thing? It's the clear number one thing you take away. They really outperformed on that. And there clearly was an awful lot of shoe leather and sweat equity that went into getting that result. And they should congratulate themselves for a minute or two and then get back to work. If they're going to be a growth stock going forward, they're going to have to continue to grow and it's going to be harder and harder as they get bigger and bigger.

What do you think about Hastings stepping aside? Well, that's interesting. You know, you look at Disney and what happened when Iger stepped aside several years ago. And of course, Disney fell on some hard times anyway and had a hard time with the pandemic and everything else. But transitions can be very, very dangerous things. And Disney stock got cut in half during that transition until Iger came riding back in. So this will be something to watch closely when you talk about management, the talent running the company, and whether they're still got the right talent on the right seats on the bus to pedal as fast as they can on the bus.

Well, I mean, one would believe, though, he doesn't get off the bus unless he thinks that it's pretty smooth sailing ahead, though, right? You would hope that's the case. I think people step down for all sorts of reasons. And you would think that he feels like he's leaving in good hands and it's a good time for him to exit stage left. Time will tell. What about the other big tech holdings that you have? I got Google, Meta, Amazon, Apple. Does this make you feel any better about those earnings that are, I don't know, a couple weeks

away? I expect earnings comparisons for the next six to 12 months, Scott, to be really difficult for just about every one of these names. And I've got about half the position in Amazon and Google that I want to have on. So I've got a lot of dry powder in case they turn south again at some point this year, which I think is a very likely possibility. And so I'm trying to keep a lot of dry powder around and have a meaningful position. So if I'm wrong and they keep going up, you still are exposed. But where you get to buy a whole lot cheaper, I like sales. And so I'm always waiting for a big, big attention. Walmart shoppers kind of sale on these stocks. What kind of valuation reset do you still think needs to happen? I don't know if you heard the conversation that I had with Stephanie Link and Jason Snipe and Adam Parker,

but Stephanie Link suggested that Microsoft, and I believe she said 26 times, is still too expensive. I think you can make a good case for Microsoft trading at that P.E. multiple. But I also agree with her that that's probably a little rich if you're a long term investor and want to be a GARP investor and get a great company at a reasonable price. And the thing that I think we got all spoiled about in the bull run that lasted over a decade was that at the bottom, Microsoft traded at about 12 times earnings. And if you took the cash out of Apple a decade was that at the bottom Microsoft traded about twelve times earnings. If you took the cash out of Apple Apple's trading at six and a half seven times earnings which is just stunning. We're not going back to those multiples. We're just not going to reprice like that unless interest rates are in double digits then we got a lot of bigger problems than that. But I would love to buy those companies

at a high teens multiple something like that. I think that's a really solid good price for those companies. And they're a long way off from there. So they could go down quite a bit further before all this ends. George, we'll talk to you again soon. I appreciate your time as always. That's George C. Annandale Capital joining us. Thanks, Scott. On the back of those Netflix earnings, it's time for a CNBC News Update now with Bertha Coombs. Hi, Bertha. Hi, Scott. Here's what's happening at this hour. The Supreme Court says it still has not identified who leaked a draft of the opinion overturning abortion rights. Investigators have been searching for the past eight months since the unprecedented leak. The high court says the investigation is continuing. In France, officials say more than 1.1 million people took part in nationwide protests against pension reform that would raise the age of retirement.

Police in Paris say they briefly fired tear gas at demonstrators who hurled projectiles at a line of officers. French unions have called for another day of strikes and demonstrations on January 31st. And Bloomberg is reporting that Elon Musk supervised a 2016 video that overstated the abilities of Tesla's driver assistance system, Autopilot. Musk reportedly sent emails saying it was okay to show what Autopilot would eventually be able to do instead of its actual capabilities at the time. The final video shows a Tesla rolling through California streets without its driver touching the wheel, even though Tesla continues to tell customers to keep their hands on the wheel at all times when using autopilot. Scott? All right, Bertha, thank you. That's Bertha Coombs. Coming up, searching for safety.

Top technician Mark Newton is raising the red flag on one key part of the market where he is seeing trouble in the charts. That is coming up when overtime comes right back. Welcome back to overtime. We have two big stocks on the move. As you know, Netflix is rallying still after reporting a major beat on subscriber additions last quarter. There's Nordstrom down near 5 percent that after the company cut its outlook due to weaker holiday sales. Keeping an eye on both names for you, as we will for the next 26 minutes or so. Consumer staples, utilities, health care, the worst performing sectors to start 2023. That after outperforming last year. And our next guest says the charts are signaling more

potential downside for that defensive trade. Let's bring in Fundstrat's global head of technical strategy, Mark Newton. So welcome back. I mean, people still say that this is the place to be. What do you make of this defensive trade that, OK, so it's underperformed to start the year, the year's young? Hey, Scott, well, a lot of this is simply mean reversion, which happens most years as you exit an old year and into a new. And you mentioned it initially, you know, trash to treasure. So the three top performing groups this year have been last year's laggards, consumer discretionary, communication services. And, you know, we've also seen great movement out of materials and real estate. But the winners last year outside of energy were all the staples. Utilities in those groups are the worst performing.

And recently, we've seen evidence of utilities and staples breaking down to multi-month lows. So it's unusual because people are still very skeptical of this rally. But when you start to see the defensive groups really falling out of favor, it's unusual to expect a big market decline. Ordinarily, that's the time you really want to be bullish when something like that happens. What's the most expensive area in so-called defensive stocks, staples or utilities or something else? What would you say to that? Well, I'm a technical analyst. I don't necessarily look at valuation and cheap versus expensive. But I say all those areas are ones to avoid this year. You really want to be involved in materials and energy and healthcare. Those are groups that certainly show the potential to lead.

And I would argue that technology is going to have a much better second half and should start to move higher in the second half of the year. So look, it's all been Europe, it's been EM, it's been China's golden dragon. Those are all up 10 to 15 percent. Our own market's up two and a half percent, much better than many expected. But let's not forget that the year not only got off to a good start, but we're in the best quarter of any of the 16 quarters that represent the presidential cycle. So many people are expecting the market's going to go down, the economy and the market, if anything. I think that's consensus. And the market's already shown that it's starting to do a lot better in the first part of the year. So I'm a little bit more optimistic, I think, than many. You're more optimistic on the market itself.

So when someone says, man, Mark, I mean, the last couple of days, pretty, pretty nasty. This rally looks out of steam. What do you say? Well, in the short term, you know, we did have a pretty healthy rally. We've not broken downtrends yet, but the internals of the market have actually grown a lot stronger. You know, we see the percentage of stocks above their 200 day moving average are now above 60 percent. You know, excluding technology, the market's actually in much better shape. And that's thanks to really industrials, financials, health care, other areas of the market where most aren't concentrating. And so, you know, my thinking is when tech kicks into gear, and that could be as early as next week, that we're going to start to have a much better

first quarter, meaning February and March are likely going to be strongly positive at a time when everybody's negative. So you think earnings in tech are going to be better than feared? My thinking is there's a turning point coming and it should be a low coinciding with, you know, an 80 day trading day cycle that I've discussed on your show before. And it's really pinpointed almost every major peak and trough over the last year. And so until that ends, it's showing that late January is going to be a pretty meaningful low in the market. And stocks likely trend up into the middle part of March. So, you know, look, rates broke down yesterday. We saw the two-year, the five-year, the 10-year yield all break down.

The correlation has still been very, very strong between treasuries and equities. Until that starts to deviate a little bit, you know, if rates are breaking down, I want to be long stocks. I don't necessarily want to be betting on a big decline. And so we'll see if that. Of course. Of course. But lastly, why do you believe that would would continue? Well, inflation continues to roll off. I think that's a key piece. And, you know, Tom Lee has been discussing that for months now. And, you know, I think that the market is respecting inflation falling much more so than it is punishing the market based on poor earnings. Tech has already been taken out to the woodshed. Now that's starting to stabilize a little bit. So I feel that it won't take much for the market to get up over, say, 4,100. And a lot of people are going to be left on the sidelines.

They're going to need to play catch up and really jump on board this rally. And, you know, as the first quarter starts to move higher. All right. We'll see what happens. And I'm sure we'll talk to you again soon. Mark Newton, thank you very much. Thanks, guys. Take care. All right. Another quick look at Netflix shares in VOT. Hanging on to that move.

Six percent. A little better than that right now. Up next, your earnings playbook. A slew of other key names still set to report. Stephanie Link back with her game plan for you. Overtime is back right after this. We're back. Netflix shares moving higher in the OT after the company reported better than expected subscriber ads and the leadership shake up as well. Netflix kicks off a big slate of upcoming earnings with roughly 20 percent of the S&P 500. Nearly half of the Dow set to report next week. Hightower Stephanie Link owns a number of the names with results on deck. Back with us now for a little halftime overtime. Yes, Steph, you're all over that calendar. So let's let's go

down the list. We got like a little rapid fire here. GE, that was one of your stock summit picks, I think. Right. Tuesday before the bell. Yes. GE. Yes. And it's it's going to be messy because they just spun off GE health care, which, you know, I also bought recently. So it's going to be messy. Headlines are going GE Healthcare, which, you know, I also bought recently. So it's going to be messy. Headlines are going to be everywhere. Don't pay attention to it. The number one thing to pay attention to is free cash flow. Five billion for the whole company. If you separate GE Health, three billion. That's what the stock is going to trade on. But this becomes a much simpler story as they spin off non-core assets and become the leader in the aviation space. IBM was kind of the surprising tech stock of last year, right?

While others more popular and more sexy names faltered, it did well. It reports on Wednesday after the bell right here in overtime, as you might have it. What's your expectation here? So, yeah, it was a great performer in 2022. This is a very defensive story. So to the extent if you think the market is vulnerable, this one has 66 percent of their total revenues are recurring revenue. Seventy five percent is software and services. And they have a mainframe cycle, an ELA renewal cycle. They have currency that has been a huge headwind that will become a tailwind.

Key for this stock is mid-single digit earnings growth guidance. That was what everybody is going to keep an eye on. I think they'll be able to do it. OK, before the bell on Wednesday is Boeing. Now, this stock has been a monster of late. I wonder how that makes you feel about the report. Even if you're optimistic about the report, how much is already in the stock? And I mean, the stock is just three months, 50 percent. I know, I know I am nervous and off the lows, up 72 percent. But here's the thing, like demand is strong with the OEMs as well as the aftermarket business. So yet the industry,000 in gross orders last year. Aftermarket

was up 10% last year. And I think that momentum continues. And that's the higher margin business, of course. They had an analyst day in November. And I think they're going to reiterate all the 23 guides that they set out in November, including free cash flow of being $5 billion this year, going to $10 billion by 2025. So they also talked about a total addressable market, Scott, at their analyst day, $9.6 trillion between 2022 and 31. So that's a nice tailwind. Yeah. Wednesday, OT, Lamb Research. Yes, yes. And I think I feel good about it because I think we're close to the bottom in the double and triple orders. We already know how weak a lot of the end markets are.

And the stock trades at 13 times forward estimates. And that's very attractive. And then they're the leader in one of the in the semi cap equipment space. So it's one that I like very much. I've been building it. I have been buying it for the last month and a month and a half. And I will continue to buy it because, again, I think, as we talked about in the last segment, I think the semiconductors were the first to go down on the concerns of overordering. And I think they're going to lead us out, especially given the end markets that

they are focused on. All right. I appreciate you sticking around, Steph. We'll see you soon. Thanks. That's Stephanie Link. Coming up, we're tracking some big stock moves in overtime. Seema Modi standing by with that for us tonight. Seema. Scott, coming up, we're tracking some big stock moves in overtime. Seema Modi standing by with that for us tonight. Seema. Scott, coming out, we're digging into a cyber breach that has one company saying costs are anticipated to rise significantly. We'll tell you which name after this short break. All right, let's give you another quick look at Netflix moving higher still after reporting results just a few moments ago. We are obviously tracking some other big movers in OT as well. Seema Modi has that for us tonight. Hi, Seema.

Hey, Scott. PPG Industries seeing a nice recovery in fourth quarter margins thanks to fewer supply chain disruptions, which has helped improve the availability of raw materials, though it did cite soft economic activity in Europe and China. PPG at 1% in the OT. Take a look at T-Mobile, saying it may see significant costs from a cyber breach after identifying a bad actor that was obtaining data through a single API. The company adds that its investigation is ongoing and that the malicious activity appears to be fully contained. You'll see shares still higher year to date. And finally, Scott, more on that headline you mentioned earlier about Costco, the stock moving more than 1% higher after the growing 7 percent year over year, underscoring the consumer's willingness to buy in bulk,

a bright spot in the retail space, Scott. All right, Seema, thank you. Seema Modi still ahead. Santoli's last word. Coming up on Fast Money, Rich Greenfield from LightShed Partners digs into that Netflix quarter ahead of the conference call. Don't go anywhere. Overtime is right back. Last call to weigh in on our Twitter question. We want to know what is the best streaming stock right now. Netflix, Disney, Warner Brothers, Discovery or Paramount had to add CNBC overtime

to vote. We'll bring you those results. Plus Santoli's last word next. All right. The results of our Twitter question. We asked, what is the best streaming stock to own? The majority of you saying Netflix. All right, well, they just reported. Up 56% of you. All right, Santoli with his last word. Not surprised by that.

One of the issues there is it's really, it's true. But it also is the only pure streaming stock, which it's got the benefit of that forever. Right. If you're buying Disney, you've got some hotels and theme parks and everything else has a little more hair on it. Now, what's interesting about the Netflix move after hours is at least so far, the pop has gone right up to where the stock topped out last week. It's like three thirty six. So see if that provides any kind of two-way action at that level, because right now, it's a good quarter on the sub basis. I don't think Reed Hastings stepping aside is necessarily a thesis changer for you. It's not like it's happening with the stock at a record high, like when Bezos left. However, it's now just a what

are you going to pay for this earning stream story? Because it's not mega hyper growth. It's like Tesla. It's price times volume right now. It's not about saving the world and creating new industry. So interesting spot. But I do think it has had initially a halo effect on some of the other streaming stocks because it seems like, you know, the category is managing to grow. What's the impact on the overall market given, you know, the uneasy nature of simply where we are as we really get into earnings season big time? Sure. I would say Netflix modest impact on

the overall index, but a net positive because I think you need two way action with earnings. It seemed like you were getting a lot of negative responses over the course of the day, whether it's P&G or some of the others. So you want to see a little bit more of a back and forth. I think expectations are low enough. They're beatable enough as we get into the kind of meat of the season next week. So we'll see. I mean, I think the NASDAQ has actually not acted that poorly. I don't think it's the area that's going to pick up and race higher

and drag the rest of the market with it. But so far, this pullback we've gotten, even though everyone's kind of skittish about it, because we're conditioned at this point, once the market loses a little bit of upward momentum, right at exactly the point everybody was watching, it usually means more weakness. But right now, it's pretty contained. You're going to have a pretty good debate of those who would look at a Netflix and say, you see, earnings are not going to be as bad as people think. And there's the other side of it, which says, yeah, great, but it's all still on the come of what's yet to happen. Potentially. I do think

that the weaker dollars everybody's been saying is a help to Netflix's numbers. And that's not just specific to them. So that's probably underappreciated is how much the dollar is down in the last few months. And at least that's a removal of a negative. Again, I don't think you're seeing anybody have this sudden stop in terms of their earnings and in terms of their business. So if you were a bull coming into this year, you weren't expecting the Fed to have completely stopped by now. You knew they were going to still be talking about a Fed February hike. That's still pretty much the case. Yeah, the economic numbers have been weak, but they've been in the areas that we kind of knew were weak mostly, which is manufacturing and housing.

So I don't think there's been a real game changer in terms of the tone of things so far this year, even though it's felt a little bit slippery this week. But I mean, you know, the Fed meeting's not for, what, two weeks? The decision is two weeks from yesterday. So you're going to have more earnings. And if the earnings are positive, it's going to be a really interesting market to see the reaction over the next two weeks, if earnings are good, right into the Fed. Well, without a doubt. I think you probably hope that the market doesn't race higher into the Fed. That's what I'm thinking about. But what I think you really want at an earnings season is just kind of to hold serve. You know, you just don't want it to be some everybody deciding that it's that the numbers have to go down a lot across the board. And that's why

I think the volatility can bleed out of the market during earnings season, even though it hasn't really this week, just because, again, you have company by company action sectors doing well or not well. You know, banks have been kind of poor in terms of their numbers. But today you had Comerica, you know, at the top of the S&P 500. So that's kind of what you want is just a little bit of, you know, give and take as opposed to everybody swimming in the same direction. All right. So the first of the fangs is out of the way. And now it's going to get real interesting. I'll see you tomorrow. All right. That's Mike Santoli joining us. Fast Money's now.