Closing Bell - Closing Bell Overtime: Netflix Reports Results 10/18/22

Episode Date: October 18, 2022

Streaming giant Netflix reported earnings in Overtime. Our all-star panel of Joe Terranova, Shannon Saccocia and Alex Kantrowitz give instant reaction. Plus, stocks rallied again today – so has the bear market turned a corner? Chris Hyzy of Merril and Bank of America Private Bank gives his forecast. And, a preview of the top 3 themes to watch from Tesla’s earnings tomorrow.

Welcome, everybody, to Overtime. I'm Scott Watney. You just heard the bells, and we are just getting started from Post 9 here at the New York Stock Exchange. It is about to get real in the OT. Netflix earnings, they are imminent. Our Julia Boorstin standing by with everything you need to know, and you will hear from her momentarily. We also have Virtus' chief investment strategist, Joe Terranova, and SVB's Shannon Sikosha. She owns Netflix. They're here to break it all down. We're going to also kick around this rally and stocks get their view on how long it can really last, especially in light of those late day breaking Apple headlines about a cut in iPhone

production. Stocks lost a little bit of momentum on that news. They did rally back, though, and finished for a really strong couple of days. So, Shan, we're waiting on Netflix, and the numbers are crossing as we speak. We can pop up the stock, and we'll show you that. And I said our expert, Julia Borson, is going through this. We're going to have all the analysis on the other side. And you can see it looks to be an initial move higher in the OT. But what do you want to hear? We definitely want to hear more than a million subs this quarter. We want to see four million subs for the fourth quarter. But most importantly, we want some clarity on the ad tier. They priced it below Disney Plus's lower ad tier. And so what we're looking for is, are we going to get some anticipated

estimates around what that ad tier is potentially going to cannibalize. If we look at where the valuation is, though, Scott, we think that it's reset to an area that really is coincident with 5% revenue growth, which is what we're looking for on a long-term basis. Yeah, you see the stock really popping higher. Julia, do I have this number right? Did they do 2.4 million subs in the third quarter? Yeah, so that was the key thing here. Netflix beating on the top and bottom line. But before I get to the earnings and revenue numbers, we need to look at the paid net additions. The company adding 2.4 million streaming paid net additions. That's versus expectations of the addition of about 1 million. They'd been guiding to 1 million. The guidance also better than anticipated. Netflix guiding to the addition of 4.5 million paid subscribers in the fourth quarter. Analysts have been looking for around 4 million.

So better than expected as well. And the company beating estimates on the top and bottom line with earnings of $3.10 versus the $2.13 estimated. And revenues of $7.93 billion, a hair ahead of the $7.84 billion estimated. We see the stock is up about eight percent on that news. So really want to dig in here to this report and figure out what those factors are that are causing a rebound to growth. Because remember, Scott, Netflix lost about one point two million subscribers between the first and second quarter. Now they're showing they're returning to growth. We'll be back in a bit with more. Yeah, you please come back once you go through that far better than feared.

I mean, that's the bottom line. When you take a look at this, I'm going to come right back to you, Shan, because now you've got, as we said, one million sub ads. The estimate they go two point four after two quarters in a row of losing subs. Absolutely. And I think one of the things that we're looking at here is potentially some makeup from the first couple of quarters where we had those disappointing numbers. Most importantly, if you look at 2023 and you look at the potential for free cash flow generation in this stock, you're going to be able to drive some earnings. We might have a little bit of headwind in terms of margin because they have a growing and important international business. But these numbers are blockbuster numbers, especially with the fact that we just have Stranger Things to really drive content right now on the channel. Joe, you used to own it. I did. You sold it a handful of months ago. Look, it was a $700 stock.

It came way back down to earth, but it seems to be rebooted lately. Okay, so a year ago I sold the stock. What's great about this earnings report is, number one, it's a return to growth. They're able to overcome the currency headwind, and I think there's a significant currency headwind for Netflix to the degree of nearly a billion dollars. But what I like about this is now the technical setup because now you're you're finally getting back into that price gap. Remember, the April earnings report was brutal. The stock declined from $3.30 down to $2.50, and it kind of wallowed at the bottom of the bathtub below $2.50 since then. We made the low in May. Now you're finally getting a

little bit of a technical breakout. This is a stock that you want to buy on strength. This is a stock that you want to see the growth returns, the technical momentum returns. That's when you buy it. And I would be inclined to do so. I just need to hear on the conference call that we've got a little bit of confidence looking forward here. I mean, they're going to tell you what they're saying here thus far is they think they're on a path of reaccelerated growth. And, Julia, I'll come back to you. Interesting. They added customers in every region, and the majority of those new customers came from Asia. What more do you see? Yeah, I mean, also interesting here that the revenue forecast and the subscriber forecast is not based on the addition of this new ad supported service.

They say that the paid net ads of that four and four and a5 million number assumes that they experience usual seasonality and also the impact of the strong content slate. They also talk about macroeconomic weakness and less than normal visibility. They also, here in the letter, talk about foreign exchange headwinds. But they say, while we're very optimistic about our new advertising business, we do not expect a material contribution in Q4 2022 as we are launching our Basic with Ads plan inter-quarter and anticipate growing our membership in that plan gradually over time. So they're making clear that that's not what's driving the better than expected forecast. And they say they want to give their prospective new members more choice, not switch members off their current plans.

And members who don't want to change will remain on their current plan without ads at the current price. So that is really making it clear here that they're trying to add more subscribers rather than to use this service to minimize turn. One other interesting thing here, I just want to point out that they throw a little bit of shade at their rivals. Very much towards the top of the release here, they say competitors are investing heavily to drive subscribers and engagement. But building a large, successful streaming business is hard, saying we estimate they are all losing money with combined 2022 operating losses well over $10 billion versus Netflix's $5 to $6 billion annual operating profits. So trying to make clear here, Scott, that they've been at this for a long time and see that as a major advantage. Yeah, well, they may be the leader, but there are a lot nipping at their heels. That is for certain. Julia, thank you. We'll hear leader, but there are a lot nipping at their heels. That is for certain. Julia, thank you. We'll hear from you again. I'm almost certain of that. Let's bring in

Alex Kantrowitz. He's the founder of Big Technology and a CNBC contributor as well. I don't think you were that optimistic coming in, but what do you think now, given what you just heard? Well, I think Netflix had a needed zeroing out, right? We had this big surge during the pandemic. It had to come back to reality. It's coming back to reality, and that's a good sign. And now you're starting to see the subscribers take up again. One thing I'll note is we saw a lot of travel during the last quarter. And one of the best things about Netflix is you can download movies and watch them when you don't have internet connection. And I've seen a lot of Netflix on the plane recently as I've been traveling over the past couple of months.

And I think that probably is what helped them. Now, it's not over, right? It's a long battle versus those competitors. I happen to think Netflix is looking at its competition entirely the wrong way. And it's a lot bigger of a threat than this company is admitting and it's trash talk at the beginning of that release.

But you have to give the company credit, right? Two and a half million or two two million above two million new ads you know that's pretty good especially can you know given the fact that we were expecting one yeah no doubt about that i mean they more than doubled it especially after two quarters of declining subs they suggest that they are on as i said earlier on a path to quote re-accelerate growth. Do you see it the same way they do? Well, it's not going to be a slam dunk for them. You know, are they going to be able to grow again? I don't think anyone was expecting Netflix to contract.

But, you know, re-acceleration from negative subscriber growth isn't that hard. As they come up against Amazon Prime Video, for instance, they might expect, they might find bigger challenges than they expect. Amazon Prime just announced they're going to do another football game on Black Friday. And so Netflix is talking about, oh, they're losing money. That doesn't paint the whole picture. Because if you get all these viewers in for Black Friday in 2023, for instance, they're going to be shopping. Amazon doesn't need to make money on that content.

It's going to make a boatload on the shopping. So it's an uneven playing field with some of these competitors. And it's going to be tough for Netflix moving forward. Yeah. Hang on just two seconds. I said I was reasonably certain we'd be going back to Julia Boorstin. And in fact, we are right now, Julia. Well, yes, Scott, you know, with Netflix, we're always so curious about guidance. And right now we're so much so very much focused on that four and a half million subs. The company says it'll be adding in the fourth quarter. But they are also announcing that after the fourth quarter, they are no longer going to be guiding to subscriber additions. Of course, subscriber additions is what we are always very focused on. But they're saying they're increasingly focused on revenue as the primary top line metric, and that will become particularly important

as they head into 2023 with new revenue streams like advertising and paid sharing. We've been talking a lot about password sharing. Now they are talking about paid sharing, and they're saying membership is now going to be just one component of the revenue growth. So starting with the Q4 letter, for the Q4, they will provide guidance for revenue, operating income, operating margin, EPS, etc., but not on the membership numbers. So that means that this is the end of an era for us looking out for those subscriber guidance numbers as they develop additional revenue streams, Scott. Yeah, end of an era for us. They hope it's a new era for them. That's clear with multi-revenue streams. Julia, thank you. Alex, back to you, because one of the thoughts I had was if we should stop even thinking about subscribers when you talk about this company,

now that they have these different revenue streams that they're clearly banking so heavily on. I don't think so. I think subscriber numbers matter a lot. You need those users in order to be able to have consistent revenue growth. And I think, by the way, you stopped guiding on user numbers. It sort of proves my point, right? You know, if you're going to have what's the reason to do it? If you're going to have massive user growth quarter over quarter, you want Wall Street

to know you want to guide over that. When do you stop guiding on that? It's when you think maybe you stagnated. So how does how do we square the fact that Netflix is saying it's in this era of accelerated growth and it's going to stop guiding on user numbers? You know, it might be trying to build more out of every subscriber. And that's one strategy. But again, it's an extremely competitive environment right now. It needs to be growing. If it doesn't grow subscribers, Amazon's going to grow them. Disney's going to grow them. Paramount's going to grow them, et cetera, et cetera. So I find that a concerning sign, and I think it backs up some of the points that I make.

I feel, Shan, that they are all most admitting if they say they're not going to give guidance anymore on their sub numbers, that they are acknowledging this transition that they are making, that investors are going to have to get their arms around this transition away from a high growth sub based business to more of a traditional media business. And then people like you are going to have to decide, well, what multiple should I put on that new Netflix? Yeah, well, I think this is what we've been talking about for the last year or so. This company is growing up. It's focused on profitability. It's focused on monetizing its users to a greater extent. And I think that although we don't have subs to fall back on, you know,

there's been several companies, Apple most notably, when they stopped guiding on handsets, to be able to say this is what the expectation is for revenue going forward. I think it also is important, Scott, because this way we're not necessarily looking at the cannibalization amongst those tiers. We're really looking at are they capturing enough revenue from their subscriber base to continue to fund content. And they're the leader in this space. All of these other streamers are continuing to lose money as they try to grow subs. I'm going to come to you in a second, Joe, but United Airlines is out as well. Our Phil LeBeau, of course, has that for us.

Hi, Phil. Scott, nice pop in shares of United Airlines after the company beat on the top and the bottom line. And it's a beat by a wide margin in the bottom line, earning 281 a share in the third quarter. The street was expecting them to earn 228 a share and record quarterly revenue for the third quarter, record revenue for any quarter in the history of United Airlines, $12.87 billion, better than expected there. And then the numbers with the numbers coming in better than the company's guidance. Revenue per seat mile up 25.5 percent. Cost per seat mile up 14.5 percent. The guidance was for an increase of 16 percent. And

the pre-tax margin of 11.5 percent. The company's guidance was a pre-tax margin of 10.5 percent. Clearly, they are getting the demand because you look at how many seats are filled on all of the aircraft, and they are getting the pricing. When you look at airfares, they're going to have strong yields, and this is expected to continue in the fourth quarter. The guidance for the fourth quarter, earning $2 to $2.25 a share. The street's expecting them to come in before this earnings report at $ cents a share. So well above what the street was expecting. Revenue per seat mile will be up 24 to 25 percent. And this will be the first quarter. The fourth quarter will be the first quarter that United has an operating margin that is better than before the pandemic. So they believe that they are all the way back. A couple

other things. They're reiterating their full year 2023 guidance with a pre-tax margin of 9%. And they are seeing zero, zero drop off in demand. This not only extends to the fourth quarter, but they're starting to get some vision, Scott, on the first quarter. And they are also seeing that. One other thing to remember, we are going to have an exclusive with United CEO Scott Kirby. You don't want to miss this. Coming up tomorrow morning on Squawk Box, we'll talk not only about the third quarter, but more importantly, the fourth quarter and the first quarter and what they're seeing. Scott, I'll send it back to you. Yeah, great stuff. Big pop in that stock. And frankly, not much of a surprise if you listen to what American Airlines did some eight days ago when they raised their own revenue forecast. That stock took off. All

the airline stock took off. And they have a similar story at United Airlines to tell Mr. Kirby's going to do that, as Bill said, tomorrow morning. We have a developing story we're following as well on Apple. Those shares are taking a hit late in the session today. On that report, the company is slashing production of one of its newest iPhones. There's the stock getting a little bit of a rebound in overtime. Steve Kovac, of course, here with that. So what have you been able to figure out with this? Yeah, Scott. So let me explain what's going on. Apple shares were actually up as much as 3% today,

but they went negative on this headline from the information saying the company is cutting production of the iPhone 14 Plus. Now, that's that larger screen model that went on sale about a week and a half ago. Now, this report was only citing one supplier, so it's really difficult to tell how accurate it actually is. And we've heard similar reports since the iPhone 14 launch in September about a lack of extra iPhone demand on top of the original expectations. Still, Scott, most analysts predict Apple can show revenue growth for the iPhone segment, even if unit sales are flat. That's thanks to the strength in demand for those more expensive pro models. In fact, we've heard some reports that Apple's shifting production from the regular models to those pros. By the way, I just got this note earlier from Jordan Klein, an analyst from the desk at Mizuho,

throwing cold water in the report, saying, quote, this article sounds more like a joke to catch clicks and eyeballs, adding it's only based on two sources across Apple's vast global supply chain. Scott, we hear this every iPhone cycle. There's some concerns about demand and sales, and then we get the real results. So look, the reason why the stock reacted so much to this, the iPhone needs to be strong because there's tons of headwinds facing Apple right now. There's evidence App Store sales could be down for the last quarter, plus all those warnings we've been getting from Microsoft and others about demand for computers and tablets

just falling off a cliff. And look, we'll get the real data next week. Earnings next Thursday. We'll get the first peak in the iPhone demand for the first weeks of sales. By the way, Scott, Apple declined to comment on their super award. Yeah, I'm sure they did. But nonetheless, it was a late-day tape bomb that hit shares of Apple, caused the market to lose a little bit of its steam on this second day in a row of a rally. But we'll continue to follow that. Shares getting a rebound here in overtime.

We still have Alex Kantrowicz with us. I think we do. You want to weigh in on this report that seemed to upset shares for a minute? I think the market reacted the way that I think makes sense, right? A little bit of a decline and then a rebound to somewhere in the middle. And I think what Mizzou says is directionally accurate, right? We need the information not only to speak to the suppliers making the 14, but also the suppliers who are making that more expensive phone. And if it turns out that this is just demand shifting from the lower price point phone to the higher price point phone and Apple ends up exceeding revenue, then this story really painted an incomplete picture of what was happening. So I think you need sources on all those ends.

I think you need more than one source. You know, it's interesting to hear this piece of data, right? But I don't think it tells the full story. Yeah. Joe, I mean, we're looking ahead to the Super Bowl next week, right? All these earnings from these mega caps. You say it's critical to be able to back up this two-day move that we had. If you want to believe in it or fade it,

the only way you can believe in it is if those companies deliver next week. I'm sitting here thinking to myself that next week is even more important because it's confirmation, potential confirmation, on overcoming the recessionary concerns that we have. It's clear that corporate management is navigating through an economic

contraction, whether it's financial institutions, Bank of America, JP Morgan, whether it's Netflix or whether it's United Airlines, they're navigating through those recessionary fears far greater than we expected. Next week, you will get the final confirmation in that process. And we've got something building here that potentially could be more than just the short-term bottom, if that's the case. Yeah. Well, I would say the death of earnings are greatly exaggerated at this point, given the early part of this season, but certainly better than feared. I'm going to leave it there for the time being. Joe, thank you. Shannon, thank you as well. I'll see you guys later on.

Alex, my thanks to you always. We have a news alert now out of Washington. Let's get to Kayla Tausche on the news line for us. Kayla. Hi, Scott. I've just learned from my sources that President Biden tomorrow is expected to announce a further release from the Strategic Petroleum Reserve in the range of 10 to 15 million barrels, according to my sources. Now, the goal of this additional release that would extend the releases through the month of December would be to offset some volatility in the market that is expected once the European oil embargo goes into place on December 5th, which is expected to drive prices even higher for consumers. What remains to be seen is whether the administration will go beyond the 180 million barrel release that was first outlined in March, and if so, how much farther they will

go. The White House and the Department of Energy have not responded to requests for comments on this. I am told that in addition to the announcement tomorrow that will be made about these further releases and the extension of the releases will be a mechanism that the Department of Energy is seeking to put in place to replenish the reserves at a fixed price. Now, last week, officials from the department held various calls with industry executives about the range of prices that they would be looking at. I'm told that range was about $70 a barrel, although those conversations are still live, they're still fluid. But the government is trying to put some price certainty on oil several years into the future.

Remains to be seen how exactly that will work. But that's what we're expecting from the administration tomorrow. Scott? All right. Yep. Kayla, appreciate it very much, that update on the Biden administration and the Strategic Petroleum Reserve. Joe Terranova didn't get out of his chair because when I heard this report from Kayla,

I obviously wanted Joe's opinion on this. I mean, there's a lot of things at work here ahead of midterms. You know, you're under the gun for inflation and the performance of the economy. It showed up in recent polling in the last couple of days. Your reaction to this? I'm glad you said everything that you said because I don't have to say it now, but from the perspective of managing money, it's all the more reason to own energy equities because we are trying to create these temporary demand band-aids and supply demand supply band-aids as well, right? We're just doing things to, in the near term, try and affect the demand, try and

affect the supply. We're not introducing longer-term solutions. Over the last five days, natural gas down 13 percent, price of oil down 7 percent, energy equities still higher by 2.5, 3 percent. That's the right strategy. We have a long-term problem that a release from the SPR, it's not going to solve. All right. So I will see you back in just a little bit. Thank you for moving one chair over, but not leaving the set. That's Joe Terranova. Let's get to our Twitter question of the day. Now we want to know with Netflix shares down 60% so far this year, are you a buyer here on the back of that better than expected earnings report? You can head to at CNBC overtime

on Twitter, cast your vote. We'll share the results coming up later on in the show. We are just getting started, though, here in overtime. Up next, more on today's move higher in the market. Got back-to-back gains now. Is it an all-clear? Is it a head fake? We're going to debate that. Plus, we have more on that big overtime move in shares of Netflix.

We do have another shareholder standing by with instant reaction to that quarter and oh by the way there is even more news coming down the pike as I'm looking at Adobe they've updated their guidance. That stock looks to be higher we'll tell you exactly why when we come back from the New York Stock Exchange live in

overtime next. I welcome back to overtime I told you about shares of Adobe and there is the picture. Moving up by just shy of four percent they've reaffirmed their guidance. So just yet another story that perhaps isn't as bad as feared in a sector that is pretty much feared, right? Software. A lot of companies under a lot of pressure, whether it's currency or macro issues, but nonetheless, they have reaffirmed their current fourth quarter fiscal year target there. And it's leading to a move higher in in shares.

Stocks, meantime, pushing higher, as you know, again, for the second straight day of gains. Big question now. Has the bear market turned a corner or is there still more selling ahead? Let's ask Chris Heise. He's Maryland Bank of America, private bank CIO. He's come here to Post 9 to have the conversation. It's good to see you. You too, Scott. Yeah. So I could go Netflix. I just said Adobe, right, in a fairly challenged area of the market, right? Some of the other software brethren have had some issues of late. This is better than feared by any metric. I don't care how early it is. Nominal growth will do that to you. In downturn like this. Nominal growth from a

very high level coming down. Once you start to see some of the fears go away, you still have some growth out there. And, you know, the consumer's still strong. So in terms of the pending doom with earnings, it was far too early to suggest that that was going to happen. However, all we need is the technology sector's earnings, Scott, to just stabilize. We don't need them to go back to where we were during the pandemic days. We just need a stabilization in that high weighted sector to stabilize the overall S&P. You more positive than you were or not really? Well, we're still on guard.

And I'll tell you why. Because two year yields haven't peaked yet. The dollar hasn't peaked yet. Once inflation begins to visibly show the signs of the underlying components of peaking out and you get the money growth start to turn negative, which we expect in the next three months, then you should start to see more stability between the stock and the bond market. I would rather pay up for stability than pay for a bottom, if that makes sense. Why do you say it hasn't peaked yet, like the two-year, at 450?

What leads you to believe that's not the peak? Because the Fed hasn't paused. So the two-year is going to track the Fed. It's not going to anticipate? It'll anticipate it up to a certain point. We still have another 125 basis points, so they've told us to go. Which we know. We know.

We know that. And the overall two-year yield usually starts to back off about one hike before they're done. So could there be a surprise and they say they're done and they pause? If they pause before everyone expects, that's the tailwind that everyone would look for. Well, I mean, Eric Johnston of Canter, who's been on with me recently, is calling for a big rally between now and the end of the year on the fact that December's it. Right? They are going to make it clear that their last hike is going to be in December. Then we have to go down the checklist and say, our earnings are going to be reset for next year. You know, consensus is still looking almost close to eight to nine percent growth.

If it's zero, I would even take zero percent growth with knowing where the markets were back in June. Where are we at now? Like 8% growth is still the forecast? Yeah, that's still the forecast for the consensus. And then you've got a huge range. And that's why there's a big range of forecasts for the S&P. What about the rally itself? Speaking of the S&P, right? We put a couple of pretty good days together.

Is this time different than other bear market bounces or not? Yes. The reason why this time is different is because it's a totally different cycle. So looking back in history, it's good to see. Cycle? I'm talking about like a month ago, like six weeks, two months ago. Is it different than a month ago or so? It's further into the process. So it's better. There's more stability. Sentiment's worse now than it was a month or two ago, certainly worse than June. So all you need to find now, once sentiment hits that rock bottom,

you need time and you need a tailwind. Tailwind is still, we need to have yields peak out. You mentioned tech earnings. We just, you said we need them to stabilize, I think was the word that you used or something that means similar. I mean, what are you expecting though next week? Because I mean, we're going to be talking about that every day leading up and then all of next week as it's the most critical thing happening of the week. Absolutely. If not the next month. And I would go as far as saying the next three months. That particular sector will tell us two things. How healthy the consumer is. How is the global supply chain? And number one, number three, whether or not the dollar's strength is really impacting them as much as everyone expects. All right.

We've had a busy hour thus far. We're only 28 and a half minutes in. I've got to go. We'll see you soon. That's Chris Heisey joining us today, Post 9. It's time for a CNBC News Update with Shepard Smith. Hey, Shep. Hey, Scott.

From the news on CNBC, here's what's happening. A State Department spokesman says a consular official spoke by phone briefly today with Brittany Griner and Paul Whelan, the two Americans being held in Russian prisons. It's also Brittany Griner's birthday. No other details of the call provided, but the spokesman does say the U.S. has repeatedly talked with Russia about a prisoner swap and that, quoting now, the Russians should take the deal. Another day of relentless Russian airstrikes in Ukraine. The president of Ukraine, Volodymyr Zelensky, saying Russia's destroyed 30 percent of Ukraine's power stations in just the past week. He accused the Kremlin of trying to drive the country into darkness, making peace talks

impossible. And a French cement company pleading guilty today to conspiring to provide material support to the Islamic State terror group. The fine? Nearly $780 million. The company charged with paying ISIS and another terror group $10 million to keep operating a plant in Syria during the civil war there. Tonight, an update on the grisly murder scene discovered in Oklahoma, plus the retired U.S. military officers making big money consulting for Saudi Arabia

and the victims of the crocodile of Wall Street trying to get their money back on the news. Right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, Shep, appreciate that. We'll be there. That's Shepard Smith. Another check on shares of Netflix. That stock rocketing higher in overtime after reporting better than expected results.

Up next, more instant reaction to that quarter from another shareholder. We're back right after this in overtime. Another check on shares of Netflix. That company reporting just moments ago. The conference call kicking off about 90 minutes from now, and you can see holding on to a real nice gain of about 15%. Joining us now with Reaction, Netflix shareholder George C. of Annandale Capital. It's good to see you again.

Your conviction was not all that high coming in. No wonder you're smiling now. Scott, pleasant surprises in this grueling bad bear market that a lot of young investors aren't used to are always most welcome. And they definitely did a classic under-promise and over-deliver quarter, and investors are delighted. And if I'm a long-term investor, I'm kind of in show-me mode. I'd hold. I certainly wouldn't sell it. I'd wait to see how they do with their new ad program.

If I'm a trader and I bought it under $200, I'd fade this and sell on the open tomorrow. So that's the way I look at it. How do you think they are going to do on this new ad tier that they have? And, you know, look, it's a multi-revenue stream story at this point, whereas before there was one story to tell. Maybe that story isn't as important as it once was. I think sometimes business people who are running businesses get too in concrete on the way they're doing it. And I think Netflix was very stubborn for a very long time about no ad versions of their product and their offering and their service provision to consumers. And I think they've adjusted to the market. And I think it's going to be successful. Now, how successful?

Will it be successful enough to recharge the growth story where you get a premium multiple for this company? Or will it be just an add-on where it doesn't affect the company that much from a profitability standpoint and the multiple stays reduced from where it used to be? We're going to find out. I think time will tell. And it's going to take multiple quarters before we see how it's going to play out. Well, that's the most critical question as to whether it deserves that premium multiple that it had. And even with a reduced multiple, if it's more of a traditional media business, if it even deserves the multiple that it has today. I think it's a momentum play right now after this quarter and I think probably it has some upward momentum that continues but I'm not certain it does

justify a premium multiple anymore I'm in a wait-and-see mode I haven't sold anything but I'm not buying on this and I'm going to just watch and see how management executes it's really a talent issue now and how the people running the business perform if they perform well it'll command a premium multiple again. And if they don't, the multiple is going to sink over time. It's going to diminish. All right. We'll leave it there.

If you make any changes to your position, let us know. Because I don't know. You don't feel like you don't sound like you may be in it for the long haul. We will see. That's George C. joining us there. Up next, trading the activist activity. Salesforce is popping after Starboard takes a stake. We're going to debate that move in today's halftime overtime next.

In today's halftime overtime, joining forces, Salesforce finishing higher after our own David Faber broke the news that Jeff Smith's Starboard value has taken a significant stake in that software company. Salesforce is down nearly 40 percent this year. Joe Terranova, Shannon Sikosha, they are back with me at Post 9 to discuss. So, Shannon, I mean, Jeff Smith made the case, look, I love this company. They do so many things that are great. And the market gave me an opportunity because the multiple came down, the stock price came down, and I jumped in. And oh, by the way price came down, and I jumped in. And, oh, by the way, they could use a little fix-in. Well, I actually don't disagree with that sentiment.

We actually sold CRM this summer and swapped it for Workday, and it was primarily on management execution. Their land and expand philosophy should really be able to continue to grow at these 22%, 23% pace year over year. But the challenge is that they just haven't been able to execute. And so I don't disagree at the valuations that we see now, quite attractive if you know there's going to be a catalyst potentially to move the stock price higher. I feel like, Joe, you know, Jeff Smith had his eye on a diamond. It came down in price. He loves the cut. He loves the clarity. And then he says, well, it could use a little bit of polish on one side there. I mean, is there really a lot to do? There is. And do you think

he'll be able to do? I think that's what it boils down. I think he will. And I think he probably was confident coming out of the analyst day hearing from CFO Amy Weaver about the plan, the vision that they have to focus on margins and to accomplish a 25 percent margin by 2026. And that's inclusive of potential acquisitions. So clearly, Jeff is incentivized to be in this name because he believes that there can be a margin turnaround story for the company. And a lot of the struggles for the company has been that they're just, they've been serial acquirers. The Slack acquisition, the street didn't look upon that favorably. So I think the CFO gave Jeff reason to be confident.

I also think there's a degree of optimism for all of us in Jeff's activity, not only here, but also with Splunk looking at the software industry and recognizing that maybe there's a little value restoration well let's discuss that Shan because you do own Adobe as I mentioned you know a few moments ago it reaffirmed their guidance and the stock looks to be to me about ten bucks higher as we're having this conversation. Your thoughts? Yeah, I mean, we continue to think about the importance of digital transformation and delivery. And I think that if you look at Creative Cloud and you look at the cloud in general, being able to track and deliver really in a hybrid environment that we're certainly in now is going to be

incredibly important. And so I think that some of these name brands that really should have a much stronger moat have come under pressure. But from a growth perspective, there really aren't a lot of competitors if you think about Adobe or you think about CRM. And if you go back from an acquisition standpoint, both of these stocks in the last couple of years has really been hurt by high-priced acquisitions. Away from software, Adobe and Salesforce, my first reaction when I listened to the interview today with Fabe's and Jeff Smith was, what else is out there that's super attractive, that has come down enough that makes it worth a Jeff Smith, a buy? Forget the activism side of it. Just the fact that you've got a stock that

he loved, that he didn't like at the previous price or the valuation, which presented an opportunity. Is there another out there or two that you're thinking about? I think, again, I think it goes back to technology, especially if you get some clarity from the Federal Reserve that maybe they will pause, not pivot. If they're going to pause, that takes the stress and the tension, Scott, off the technology sector. And there are a tremendous amount of software companies that have had a valuation reset that's really unfolded, not just recently, but throughout 2022 and parts of 2021. Think about Salesforce. The high in Salesforce was November of last year, up above 320. So this

has been something that has been, for the better part of 12 months, underperforming the S&P while the S&P made that high in January. What do you think about that question? Just the idea of other things that are out there that are time to take a serious look at. You may not pick the exact bottom, but you might get close enough. Well, I think this is what we've been saying, for instance, in technology. If you think about the transformational nature of the technology sector and the fact that there are pockets of the technology sector in which, you know, you're not seeing significant realistic competition. I think in tech, I think there's also some areas of health care. If you think about life sciences in particular, some of those stocks have

sold off significantly, especially those higher growth, higher multiple names. These are areas where we're going to continue to see disruption and innovation. And as we move into this slower growth environment, you have to engineer growth. You have to engineer revenue and earnings growth. And these companies have the capacity and the capital to do that. I think you also get a little restart on M&A once the Fed pauses. Think about Splunk for a second. That's a company that we know companies were interested in. $15, $20 billion. Maybe a Cisco, someone steps in.

I think that is something Jeff was probably thinking about as well. All right. Good stuff. Thanks for sticking around. Joe Terranova, Shannon Sikosha here. Excuse me, a post nine. Excuse me. Up next. A lot of talk in this

hour. We're all over the action in Netflix and United, but those aren't the only big names moving in overtime. Christina Parts and Nevelos is standing by. Please help me. I'm here to help you. Full force with earnings season from trucking to robotic surgeries. And the stocks, of course, are all moving in the OT. I'll have all of those names and more right after this break. All right, we're back in overtime. If you're just joining us, let's recap this busy session in overtime. Netflix is soaring on better than expected results. Subscribers beating in a big way.

United Airlines also popping on record revenue. And Adobe, after reaffirming its own outlook, that stock getting a nice lift. The action, though, does not end there. Christina Partsenevalos is tracking some other big movers for us. Christina. That's true. The action continues. Let's start with electronics trading platform operator Interactive Brokers. You can see shares are up 3% after posting a revenue beat, but missed on earnings per share by just a penny, much like we saw with big banks recently reporting. Interactive Brokers also benefited from higher interest rates,

net interest income up 73% year over year. And you can see again, shares up over 3%. Shares of J.B. Hunt Transport moving higher on an earnings and revenue beat, or earnings per share, I should say. The company saw higher revenue per transaction and an increase in volume that actually helped offset those higher rail and truck and fuel transportation costs. You can see shares are up almost 3%. And then last but not least, the biggest mover right now, shares of Intuitive Surgical, surging 8%, over 8% on the Q3 revenue and EPS beat. The company is known for its robotic surgeries and it saw its core business strength actually increase despite a, quote, challenging macro environment and some lingering pandemic impacts. Scott, those are your movers. All righty, Christina. Thank you,

Christina Partsenevelos. Up next, we are counting down to Tesla, the EV maker reporting results tomorrow in overtime. We break down exactly what you need to watch with Phil LeBeau in our two minute drill next. All right, Tesla is set to release its results tomorrow right here in overtime. Phil LeBeau is here with what to watch. We'll call it our two-minute drill, Phil, and this is going to be a big one. It always is. Yeah, and even more important, after the Q3, deliveries came in light of expectations. So three things to watch for tomorrow. First of all, automotive gross margins. Most analysts think they're going to come in just a tick over 29%. What's happening with the ramp up in deliveries for the fourth quarter, especially coming off the third quarter? And then there's the gigafactory

growth. Not just Texas, not just Berlin, but the big enchilada in Shanghai as they build more and ship more vehicles at that gigafactory. Remember, as you look at their annual deliveries, they're just a hair under a million so far this year. The estimate, most have them coming in about 1.35 million vehicles for the year, so they're going to need a big fourth quarter. As you take a look at shares of Tesla, remember, numbers come out after the bell, and then there's the conference call. Will Elon Musk be on the call? He's been on most of them lately, Scott. I think we can probably expect him to be on this call, but who knows? You know, it's Elon Musk. He may or may not be on that call. You got the Twitter distraction too, right? And I'm sure he's going to be asked about

possible stock sales. I mean, that remains one of the overhangs to this story. Is he going to have to sell more shares to try and fund that deal? Right. I would be stunned if it comes up on the analyst call. I have expected that question to come up. It has not come up in past calls. Twitter is not even mentioned on these conference calls. So if it comes up tomorrow, that'll be a bit of a surprise. Hint. Analysts ask the question. Hello. All right, Phil, thank you. We'll see what happens. That's Phil LeBeau. And we'll see you then. I'm certain of that. Up next, Santoli's last word. Overtime back in two minutes. All right. To the results of our Twitter question, we asked you with Netflix down 60 percent

this year and now on the back of earnings, are you a buyer? More than half of you saying no, I'm not a buyer. All right. Almost 58 percent. Mike Santoli's here for his last word. Crash in the stock from 350 to 200 in an instant, I think, soured some sentiment in Netflix. But it's rebuilt toward 275. Yeah, and it just reminds us, since we're going to do a segue on that, so far so good with earnings is the takeaway. For sure. And I think also there's some relief that we can focus on the micro and the corporate as opposed to the macro, at least for a day. The bond market kind of stayed out of the way.

The dollar was down a little bit. The Fed had nothing to say. And you had upgrades. Target up five percent on an analyst upgrade. A couple of activist moves on Salesforce and Colgate stocks got moving. And then, yes, earnings seem OK. The bar is low. We're going to grant that there's going to be blow ups. Obviously, we know that's early in the earning season. But I do think that it shows you that there has been a reset in the average stock, right? The equal weighted S&P is 13 and a half times earnings coming into this week. The equal weighted Russell 1000 is up 4 percent on the week. So there's a little bit of clearance to maybe make something out of a company by company type approach for now, as opposed to the macro.

You mentioned rates, right? We're still a prisoner to moves in rates. And we saw it midday when we did our midday word with you. Yes. If rate as rates ticked a little bit up, the stock market ticked a little bit down. And that's just the way it's going to be, despite earnings that are apparently going to be OK. The sensitivity is not going to go away. And I keep pointing to bond market volatility. It's not even just that yields are going up,'s that we're seeing these very jumpy moves globally. The bond markets version of the VIX is screaming higher, and it's basically not calmed down. It's at a level where everybody involved in the markets feels as if they have to play smaller, you have to take less risk. And that means there's less kind of grease in the wheels of the market.

And that's one of the reasons I think you're seeing a lot of these gappy movements. Speaking of, you know, bond market VIX, stock market VIX, we're still over 30. Yeah, we were over 31. So we're still a touch over a smidge over 30. We are. And we're just, you know, four days removed from a bear market low. 30 means, you know, it's handicapping 1% to 2% moves a day at minimum. We've been getting that. That's the thing. We've been getting these intraday moves that are at least that size. So until the index itself really calms down, you're not going to have that much room for the VIX to come in

unless you get another rally day. It should crack below 30. And then once it's, you know, three or four points below its peak close, that's sometimes a buy trigger. Let's not forget, too, you know, three or four points below its peak close, that's sometimes a buy trigger. Let's not forget, too, you know, as much as we're going to focus in the days ahead about about earnings, the Fed meeting is early this time. November 2nd. Right. So normally you get another week or so. Now you've got that front and center. We talk a lot about that, too. Interesting today, The Times had a piece that was very assertive, saying it's going to be 75 basis points in November and maybe leaning heavily toward a bigger one thereafter.

The market didn't really flinch on that. Maybe that's already what's in the price. Well, I don't know. If they start leading us to believe that it's 75 again in December, that could be trouble. Well, no doubt about it. And we're all slave to the next inflation number. We know that. All right. So another key earnings report is coming tomorrow. That is Tesla. We'll have that, of course, in overtime. We'll see you then for your last word. I will see you back on the desk for all of that and more.