Netflix Earnings Results… And What’s Next for the Energy Trade 7/16/26

22:15Eli Horton:And that's what the success of their currency, their stock, were able to do for them. I mean, they're in the driver's seat, so they're the large stack at the poker table, and they're using their chips good for them, and they should. This, to me, speaks to, again, M &A in the space, which will continue. There's somebody I follow on Twitter, a guy named Chris Irons, who's been writing about psychedelics. If you want to look at an ETF, look at advisor shares. They have something called PSIL. I can't speak intelligently about the components, but if you want to be in a space in a broad way, that's one way to play it.

22:44We had a number of big movers in pharma today. Merck was another one on the approval, FDA approval of its once daily cholesterol lowering pill. That's supposed to be better than a combination of. I mean, those are generics have been around a really long time, the statins. But this was interesting. So that was a nice move there. To Lilly, though, this was a cash deal. The stock moved. The value, the stock was up by$12 billion. The purchase price was, you know, two and something. Right. Tiny. Right. So good for them. Where are you in health care, if anyone? So admittedly, I'd never heard of a Ty Beckley until today, but I did a little bit of reading.

23:19And what I think is interesting is it's very much a capital allocation story. So this speaks to the power of scale and competitive advantage. And they're taking that growth market of obesity and GLP-1s and redeploying that cash at a long-duration growth asset, which I think is interesting. These guys are skilled capital allocators. The company earns a 30-plus percent return on invested capital. So, you know, a strategic level makes sense. Coming up, no easy way home for the housing market. Inside the latest data, painting a tougher picture for buyers and why homeowner stocks seem to be defying the headlines.

23:51You're watching Fast Money Live from the NASDAQ Market Site in Times Square. Back right after this.

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25:30Welcome back to Fast Money. U.S. mortgage rates hitting nearly one-year highs. According to the latest Freddie Mac data, the average rate on a 30-year fix is now 6.55 percent. That's up from 6.49 percent just last week. Despite this data, homebuilder stocks actually catching a bid today. Pulte, KB Home, Toll Brothers, among the names in the green. I mean, it takes a while for the mortgage rate to actually reflect higher treasury yields. So it could be that yields have come down since that peak.

25:59Eli Horton:But you also know the mortgage rates are going to stay sticking for a while. He just pointed out to me in the break and we can pull up a chart. I mean, there are a lot of these names look exactly like Pulte Homes, Tall Brothers, a lot of double and potentially triple tops from a couple of years ago. I'm not exactly sure what the market is focused on here because the labor market, although the unemployment rate is fine, people are worried about their jobs. Rates are going higher. Consumer is spent up. There are a lot of reasons to be bearish to the homebuilders, yet here we are. A lot of them are approaching all-time highs.

26:27Eli Horton:It doesn't really make a lot of sense. And I don't think these guys are selling homes. They're buying buyers, right? So we've heard that story already. They're discounting the homes. They're actually lowering the mortgage rates. Until mortgage rates drop to 5.5%, you're not going to see this sector explode. They're crimping their own margins. There's very few of them that could make money in this type of environment. man. Guy said, Pulte, if you look at D.R. Horton or Toll Brothers, the rest are garbage. But I mean that in a nice way. I don't want to get email that. Right. But to that point, I mean, the median home sales price is actually higher.

27:01So, I mean, the K-shaped recovery is happening or the K-shaped consumer, whatever you want to call it, is also in the housing market in that the higher income people are buying homes. They might be buying for cash and not depending on a mortgage. And that part of the market is OK. Are you home affordability is rough? It's the worst to spend in 25 years. The median price up rates at the highest they've been in quite some time. Look at the Atlanta Atlanta Fed. Forty five percent of median income is what would need to be spent on the cost of homeownership on a monthly basis. Since twenty twenty one, monthly mortgage payments would be eighty five percent higher.

27:36That's five years. That's you know, we can't afford that. I would prefer not to own a home builder. I think something more like a Ferguson would be interesting because they've got more exposure to the remodel community, which is the better end of the K consumer. And then also they have exposure to infrastructure on the waterworks side. Coming up, Netflix's conference call just wrapping up. Light Shed Partners, Rich Greenfield will join us next to dig into all the headlines moving the stock back in two.

28:08Welcome back to Fast Money. Stocks ending the session lower. The Dow shedding 100 points, S &P off a half a percent. The Nasdaq leading the declines down a percent and a half. Some big earnings movers during the session. J.B. Hunt surging 8 percent, reporting higher profit in the second quarter as revenues grew across nearly all business segments. United Health up a percent after the insurer raised its 2026 profit outlook on the back of better than expected a quarter, although it had been up more than 10 percent at its highs. And GE Aerospace dropping 4 percent despite strong results after management warned of ongoing inflationary pressures and supply chain constraints.

28:41Meanwhile, another bad day for SpaceX, now down 14 percent over the last five sessions. It closed under its initial offering price of one hundred thirty five dollars a share for the first time. And Apple rising almost two percent to close at fresh records. It is inching closer to unseating NVIDIA as the world's largest company, just about one hundred billion dollars in market cap shy of that title. And Coca-Cola, lower in extended trading. The company announcing a data breach impacting its fair life business segment, resulting in a temporary pause in operations. The stock is down a little more than a percent after hours.

29:13And let's take another check on Netflix shares. They're down by over 8 percent right now. The co-CEO saying he expects content spend to increase 10 percent this year. Will expand live programming to regional events as well. Rich Greenfield joins us now, fresh off the conference call. He's co-founder of LightShed Partners. So, Rich, what do you think? I mean, investors were like peak bearish going into the quarter. So now what? Look, Melissa, this is fundamentally investors believing that Netflix has gone X growth. Like, I think they are just projecting out and saying engagement isn't really growing much.

29:49You know, it's up 2 percent over the first half of the year, year over year. And I think they're going, God, it's up 2 percent. This thing's going to start to slow even more. revenue growth, which was, you know, going to be 12 % for the year X currency. They're going, that's going to be the single digits pretty soon. And so they're literally just looking at this company as like, this has based, two people have already texted me saying, this is now a legacy media company and like, good luck streaming instead of the old good luck bundle. I mean, people are just, this is what feels like peak bearishness.

30:19People just don't believe that there is growth left in streaming, which I think is fundamentally incorrect when you look at this, especially on the advertising side and how fast that ad business is growing, how early it is. But honestly, Melissa, there's no way to disprove it other than just time. And investors right now have no patience for this company and they're just puking it. Do you think that's the right thing to do, Rich? Or do you say no? You know, with peak bearishness, the stock down an additional 9 percent on top of being down 40 percent or 30 percent going into the court, you buy it.

30:53You do. I mean, this is when you find the bottom, right? It's like when you see everyone who literally there is just hatred and everyone is going. There's no belief. I mean, think about it. They're growing revenues at 12 percent. Margins are expanding meaningfully. They're buying back a lot of stock. They have true conviction in how big the I mean, Greg Peter said it right on the call. We are still very early in our growth as a company, but investors are like investors don't care. And so that's the opportunity. The company's buying the stock, they believe. And I think this is now going to become a show me stock over the next year.

31:27They have to prove that there is growth. And, you know, one thing that isn't really being talked about, there is less competition. You know, Hulu is basically being sunset by Disney. HBO, assuming the Paramount deal, eventually goes through. We'll see how fast it goes through with the regulatory battles. But eventually, HBO is going away and is going to be folded into Paramount+. And so the competitive dynamic is actually becoming a lot easier, I think, over the course of the next 18 months in terms of how many different services are out there. But again, none of that matters today. Right now, it's just fear on the engagement report.

32:01The company even said, oh, we're not going to report their engagement numbers on a six month basis. We're going to every year. Like any time you pull numbers or pull information, investors think you're hiding something. It doesn't matter whether it's impacting revenues or earnings. People are just nervous. And I think they have lost investor confidence. And it's going to take time for Netflix to demonstrate and prove to people that they can grow earnings, high teens towards 20 percent until they do that and put that on the board. People are going to be nervous. Rich. So I agree with you. It's Steve.

32:36I agree with you. I think peak bearishness is when you want to buy the stock. I'll give you two reasons. I think costs are probably rolling over if not coming down. And then the ad tier. I don't think anyone gives it any credit for ad tier. It's still the best streamer out of all the names that you had mentioned there. It lifts all boats. So when I look at the chart, I think this is a chart I want to buy. I don't want to sell. Just talk to me about the ad tier. Are people leaving that on the side of the road? You know, this is an ad business that's growing 50 or sorry, growing 100 percent year over year, basically doubling from one and a half to three billion.

33:13But the three billion is still a tiny number. Like when you look at the amount of time spent on Netflix by the ad tier members, that three billion, I think even if they never grew engagement, you know, something they don't talk about, if they never grew engagement again, that three billion could be multiple times higher than where it is today. I do think that they're doing a lot of things to accelerate engagement in terms of going into shorter form programming, building out video podcasting. Like there's a lot of things that they're doing. And, you know, I think the most interesting line of the release that nobody really paid attention to was that they said all of the new forms of content they're adding, whether it's, you know, the Jay Shetty show or Jake Shane, like those types of things.

33:57They're actually finding people are watching not in the evening. They're actually watching during the day. And so they think it's incremental viewing. And so when you think about how that sort of compounds over the course of the next 12 months, I think there's actually reasons to believe engagement gets better. And that's obviously important longer term for the advertising business, because obviously eyeballs equal advertising opportunities. And so there's no doubt that the advertising is being overlooked. Nobody cares about it right now. It's just, hey, engagement is bad. We're going to sell this stock.

34:29First, we've got to leave it there. Thanks. Thanks for your take. We do appreciate it. Thanks, Melissa. Big opportunity. Do you agree with Rich? Big opportunity here.

34:38Eli Horton:I do, because they're still the best in breed here. I mean, again, forget about the total adjustable market. Although they're talking about it now, they've only reached 50 percent or less than 50 percent of what they believe their audience could be. There are a lot of reasons to like it. But the reasons not to like it, as Steve pointed out, and as we talked about earlier, is the fact that vis-a-vis free cash flow and other things, the growth is not there and they're spending more money than the market wants them to. And that's why we're at these levels. But you get it at evaluation. It's not ridiculous.

35:06Eli Horton:Again, the best in breed in terms of what they do and they dominate the space. So I don't know what to tell you. I get it, though. Peak bearishness feels really bad. Yeah. Eli, what do you think? I agree with most of what's been said. Peak bearishness sentiment is it's a hated stock at the moment. You have to like that. I do question what my thesis would be. Like I mentioned earlier, I do think that the thesis has changed here from penetration and where Netflix is on the S curve. to now it's the advertising business or perhaps live sports. I'm not sure those deserve quite the same multiple. And so I'm a little skeptical on that dynamic.

35:42So just to the multiple, though, the multiple will go down tomorrow, right? Because the stock is down, I don't know what, 8%. So it'll be a high teens multiple with a great balance sheet. And, you know, I've owned it for a long time from higher than here, but I'll be looking to buy more. Coming up, powering the AI buildout, a look at the picks and shovels of the AI trade and the under-the-radar names our traders say are worth a closer look. Stay tuned.

36:16Welcome back to Fast Money. Energy names tied to the data-centered buildout dropping today. Bloom Energy, Vistra, Constellation, GE Vernova all taking a hit. Our guest trader here has a way to play the rising demand. So, Eli, which names do you like here? Well, first of all, just on the thesis, I think we have a very strong view that the infrastructure layer, the power infrastructure layer is constrained. It's a bottleneck. We're seeing acceleration of electricity demand in this country for multiple reasons, which is important. It's not just data centers. It's reshoring and manufacturing. It's the electrification of our economy, electrification of transportation.

36:50That's driving more robust demand than sometimes these stocks get credit for. We see evidence of this in a number of ways. The PJM, which is the largest utility region, just had yet another power price auction that hit the cap. New York State put a one-year moratorium on data centers. I think that's the wrong move. I think it doesn't encourage competition and business to come to the state. I think the right solution there is to what we call bring your own power. And data centers building their own power behind the meter, not connected to the grid. We had a company like Powell Industries, which we own, Bloom Energy.

37:25They both fit into that mold or that thesis quite nicely.

37:28Eli Horton:Let's talk about Bloom Energy real quick because it made an all-time high, I think, less than a month ago,$350-ish. It's trading just north of$200 now. There was a short report, I think, a week and a half or so ago-ish. Or this week. Was it this week? I lose track of time. But whatever. I mean, the point is now people are shooting against it. They report, I think, next week or early in the following week. Thoughts on what to expect in the earnings? So that report was focused around their ability to source a certain critical material that goes into solid oxide fuel cells. And we've done our work on that.

38:01We spoke to the company. We don't think that's an issue at all. Bloom has really found a sweet spot with these fuel cells. And there's no better proof point than Oracle, which is building an entire gigawatt scale data center entirely on Bloom. You would never have done that before. It was redundancy. It was backup. Now they're treating that as prime power. So really, really interesting value proposition that companies bring to the market. One of the arguments in the short report specifically about that critical material, scandium, is that Bloom, that there's only so much scandium in the world.

38:34And that Bloom would need more than what is available in the world in order to actually complete its backlog. Right. And we, that's exactly what the report says. We started looking into this several months back and we found a different conclusion. So there's plenty of scandium. That's what we found. You just got to know where to look. You got to get a guy, you know. Right. I mean, I have some tangential plays that might fall into, you know, Qantas services, which actually has a university, creates their own electricians, which is a good thing to have. And United Rentals, as, you know, these giant projects are there.

39:09Absolutely agree. I mean, Qantas plays on yet another bottleneck. These bottlenecks are like whack-a-mole right now. They're just popping up in the industrial economy. But skilled labor, it's hard to come by. And so quanta or comfort systems, they have these skilled technicians and they're hard to come by. So better pricing, power, less competition. I bought my wife's engagement ring with Scandium. It was way ahead. The problem that I'm seeing is what Eli just mentioned. What happens if New York is the first state to start doing this and the moratorium isn't just about bring your own power. It's about you're not building anything here.

39:43So that actually could be a tailwind to hyperscale is because they can't spend the money that they want to spend. So it's more constrained, more constrained. They don't have that. They can't. They have dollars chasing nothing at that point. I mean, this is this is sort of the next derivative play on it. But I agree the Bloom Energy chart and the Powell Industries chart. They look identical. And those are the two best plays probably in that area. Comfort systems caught my eye because once upon a time, Karen and I were riding home together in our Uber. And we were talking about stocks and areas that cannot be disrupted by AI.

40:14Guy's laughing because this is actually what we talk about. I know this. That and we complain about our husbands. Or I do. I shouldn't say that Melissa does. I actually do. You complain about Karen's husband. Yes, everybody complains about my husband. But Comfort Systems, that's a skilled labor, right, to build the data centers. 100%. So that can't be – I mean, it's interesting because they build the data centers, but they won't be disrupted. Yes. Stealed labor, then there's Halo, these places where you don't have to question terminal value. The market's obviously not the past month or so withstanding, found comfort in those, and no pun intended on comfort systems, but found comfort in those businesses.

40:47Eli Horton:Before we leave for commercial, let me just say that both Karen and Melissa have amazing husbands. Oh, you're very nice. In Ben and Lawrence. And although they may complain, they do it lovingly. In reverse, I'm with Lawrence, she's with Ben. No, I'm not. Coming up, a false check on the retail trader, how they are navigating market volatility and where sentiment stands for the second half. Investopedia editor-in-chief Caleb Silver will join us next with his findings. More Fast Money in two.

41:21Welcome back to Fast Money. Investopedia's latest read on investor sentiment is in, and despite apparent re-escalation of the war in Iran and inflation concerns, Traders remain cautiously optimistic. Joining us here on set is Caleb Silver, chief business editor of People, Inc., and the editor-in-chief of Investopedia. Caleb, great to have you with us. 44 percent cautiously optimistic, but right underneath that is skeptical. Yeah, and for good reason. We're exhausted. In six months, we've had like six years worth of news, and individual investors have been through a lot, not knowing which kind of way to go.

41:50So they've just kind of gone with the trend, and the trend has been up. Not a lot of movement when you look at what individual investors are doing with their trading activity. I was looking at Vanditrack study there. A lot of movement in some individual names, but by and large, volume way down. So a lot of people just saying, I think it's going to be OK. I'm going to hang in there. Market is in a bubble. Is this percentage higher than in the past? Yeah, it's right around where it's been in the past. And they really haven't come off of the AI is in a bubble thing. That's the part of the market they think is in a bubble, but everything is associated with that now.

42:19So by definition, most things are in a bubble. if you talk about how individual investors feel, they're not stopping what they're doing, maybe leaning more into ETFs than they have in the past just for the diversification. And chasing single stocks has been dangerous for individual investors. And they were chasing, if you look at what they've been buying, SpaceX and others, and it hasn't worked out well for them.

42:39Eli Horton:You've been coming on a long time. We love it. Here's something I haven't seen. Oil and energy stocks. Yeah. Yeah. Welcome to the party. They're back into oil and energy stocks and some international stocks late to it as well. but without any guidance on where to go in terms of tech stocks and seeing a lot of their favorite stocks sell off 15, 20, 25 percent. They're looking for other places to deploy money. Now, it's not a large movement of money and it's not most of our readers and most of our survey respondents, but it's some saying, I think it's time to unwind some of these trades that have made me so much money over the last few years.

43:10Caleb, when you look at these stats and this data and the percentages, as Melissa said, right underneath that, there's another group that believes the 180 degree difference is going to happen. What's the decoder ring when you've been doing this for so long, when you see everyone push to the bullishness or push to the bearishness, where do you say, OK, this is the percent where we're on the precipice of something changing? Yeah. Well, if you add up the cautiously optimistic with the optimistic, we're talking about 60 percent optimism. And that's even more than AAII or other reads on that. So I look at individual stock buying, how much of that activity is happening right now.

43:42That shows risk. Also, the$10 ,000 question that we love, that shows you where the appetite is. And you can feel it pulling back a little bit just because there's some exhaustion going on. And there's been some wild swings in these individual names. Yeah. ETFs is number one. Number one. It had been individual stocks, though. Yeah. It had been back and forth between individual stocks and ETFs. And after enough chasing and getting burned by it, they're back trying to diversify and playing it a little easy. And a lot more choices now if you want to access the market with ETFs. It looks like they're giving up on MAG-7 at this point.

44:11I mean, slowly rotating. Slowly rotating. Where are they going to at this point. Yeah, well, they've had done some chasing on things like SpaceX and they did some chasing in semis right now. But when you look at what they're buying, some Microsoft, some Intel, they're going where the money is going. And of course, SK Hynix was a big buy for individual investors. But again, the rotation into energy and other places that have seen some upside, that's been significant in the last, I would say, two to three weeks.

44:35Eli Horton:Bond yields have been going higher. Your viewers, your readers are very in tune with what's going on. Any comments on that? Yeah, there are equity investors. They like the stock market and want to stick with it. That's where the wealth has been created. Now, you can tell who the older cohorts are depending on what they answer. So bonds, but I think they would take something like a Berkshire Hathaway or a JP Morgan before they started deploying a lot of money into the bond market. At Investopedia, you can also track what people are searching. So where does prediction markets, does that fall into a top search?

45:05Absolutely. And more and more people are trying to figure out how those work and how they will ultimately affect the equity market. But I think a lot of people have been getting educated in things like green chew and lockup expirations because they've been chasing individual stocks. So it's so fun to watch people educate themselves about what's happening. Maybe they already bought the stock and are now like, wait a minute, what's a lockup? What's a green chew? Where did all that stock go? So they're getting smarter about it, but sometimes it takes a little losses to make them go back to the drawing board.

45:33Yeah. And just quickly, the word cloud. NVIDIA is the biggest. Still the biggest holding, still the biggest stock in the market. I think people may let go of a little bit of that, but it's made them a lot of money. So it's hard for individual investors to completely depart from what got them here. Caleb, always good to see you. Thank you. Thank you. Caleb Silver, Investopedia. Up next, final trades.

45:57Final trade time. Eli. Oh, that's me. That's you. Emerging from a four-year freight recession, Union Pacific. Great to have you, Eli. Steve. So one of my best investments that's under radar, slow and steady, S.L. Green, prime property centered in New York. It's been slow and steady, and I love looking. Erin. Yes. So last night I said I'm going home with the girl that brought me, but I was going home with auction trade, with a call spread. I'm going home with her again, maybe three-day rule on Netflix, though. Guy.

46:29Eli Horton:In unrelated news, Matt DiLiberto, the CFO of SL Green is a huge Fast Money fan. Gilead sold off this enough. All right. Thanks for watching Fast Mad Money with Jim Cramer starts right now.

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