Netflix's Q3 demonstrates the dreaded 'pandemic pull-forward in demand'

Squawk Pod


Netflix's just reported in its worst ever earnings MISS INVESTORS BANS quarterly results from the streaming giant Jillian. Boston's on the West Coast this morning joins us with what went wrong in Q. Three. Was it Netflix's or wasn't the analysts Julia? How well expectations that were certainly high and then? Netflix shares today we see them plummeting on the biggest earnings myths and snatch flicks went public those earnings falling nineteen percent short of those analysts expectations now with Netflix. Of course, always about that subscriber number, it fell short of the companies already lowered expectations the company outages two point. Two million subscribers in the quarter in guided the addition of fewer subscribers in the fourth quarter then anticipated. Now, that's not all looking ahead to next year. NETFLIX's warns of some very tough comparisons but co-ceo hastings saying he's not concerned about competition we compete. So broadly, we compete for time against you know tiktok to as well as HBO as well as I tell really, the limiter for us is you know what's the quality of our service How often how many nights you say Oh my God I want to go to Netflix and and watch the next show. In contrast to Netflix snap shares soaring after beating expectations about twenty one percent beating expectations really across the board snaps revenue growing fifty two percent more than double the growth rate than analysts projected with a surprise profit of one cent per share that's compared to the five cents per share loss than analysts anticipated. Now, Becky what's really interesting here is that snap has really benefited from Kovin pushing advertisers to try their augmented reality ad formats and also guys there was a subtle dig at facebook sounds like they may have benefited from that facebook ad boycott well. Julius stay here we want to bring in another voice to the conversation as well. Rich Greenfield joins US right now he's of course, partner and Co founder light said partners and I want to start with Netflix's first. Then we'll get back to the snap story, but but Netflix, you say the real story here is that the bear story is gone. What do you mean these are disappointing numbers, but it does come after a very strong first-half for the company for for a subscriber ads. Yeah. Look look I heard the commentary that you were just talking about in terms of like the biggest. History of Netflix. But remember this is a company where again people are very focused on the subscriber trends and the subscriber trends in the first two quarters far out seated in terms of the beat far outside at Amiss here I think the real story that people should be talking about is that not only are they generating substantial free cash flow this year, but even next year as production is in full swing again, they're talking about that they may be at break even free cash flow and so the financing the sort of the bear thesis on Netflix for years was that they. Don't have the money to finance all of this content they're going to run into capital, they won't be able to finance. They won't be able to raise capital and that was sort of the the the bear thesis that's been ongoing for years and years. They're basically self financing now. So the view that Netflix has a capital raising issue is now gone, and if you start to look out over the next few years in terms of their pricing power and you're starting to move up price in Canada recently in Australia, we think the US will happen either in or early Q. One. Pricing Power and all of a sudden you don't have any cash flow needs in terms of having to raise capital. This thing's going to generate dramatic free cash flow and you're going to see the scale to billions and billions of free cash flow a year. That's what people should be talking about look beating lieutnant missing numbers is never a good thing for stock I get why it's down today make sense that it's down at Ted a huge run this year but I think this is more about consolidating as it continues to move higher. into. The point I think the company said on the call that if there had been another forty eight hours in the quarter, they would have met their projections or even exceeded some of the projections on this. But but when you see a pullback of about five point, three percent today does that represent a buying opportunity to you given how much the stock is already run this year? Absolutely because I think the thing that you need to be thinking about Becky is when you think about what's happened over the last sort Of like six weeks, what's really become clear one, the pandemic isn't just disappearing. You're seeing it flare up again in the US you're seeing flare up across a lot of Europe it even parts of Australasia like this is not going away. So we're all going to be more homebound or in terms of you know kind of entertainment activity for a longer period of time unfortunately over the course of the next six to nine months at the same time, the movie calendar has cleared out like all of the movie studios have. Essentially delayed all of their content two, second-half twenty, twenty one if not into twenty, twenty two, and so the path for Netflix's the runway has been completely cleared. They were going to be putting out movie after movie they've got a Ron, Howard movie hillbilly comes out in a few weeks an animated feature over the moon there's just a ton of content coming and really no competition and so I think that's GonNa really well,

Coming up next