Netflix Reports Results… And China’s Housing Pains 10/17/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square this is Fast Money Here's what's on tap tonight. Netflix and Thrill. The streaming giant seeing shared jump after a top and bottom line earnings beat. And it's getting back within range of a record high. We're dialed into the call. We'll bring you all the details straight ahead. And Uber's travel plans. The ride-hailing app may be interested in taking to the skies the latest on a potential deal with an online booking giant. Plus, Taiwan Semi revives the chip trade. Elevance Health loses elevation. And China's rally loses steam.

0:33I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Karen Feinerman, Steve Grasso, Dan Nathan, and Guy Dami, the boys there, joining us from Miami today. We start off with Netflix shares jumping after its Q3 earnings report, the streaming giant beating top and bottom line estimates. The earnings webinar is underway. CNBC's Julia Borson's got all the details. Hey, Julia. Hey, Melissa. Well, Netflix beating expectations across the top line, the bottom line, and also guidance. Netflix also adding more than 5 million new subscribers. That's half a million more new subs than anticipated.

1:04Now, on the call just now, as the company tries to shift focus away from sub numbers, they're talking about the growth of engagement. Ted Sarano is saying there is an average of two hours per day watched per membership. And with so much attention on the company's ad business, Netflix warning that it is still early days, saying that ads won't be a primary driver of revenue growth in 2025. but noting that their ads plan accounted for over half of signups in ads countries and that membership on ads plans grew 35 percent quarter over quarter. They say that the near-term challenge around ads and the medium-term opportunity is that they are scaling faster than their ability to monetize Netflix's growing ad inventory.

1:48Now, as for expectations of a price hike, they said in their letter to shareholders that they are working to improve monetization by refining plans and pricing. They also praise the ad-supported version of the app for enabling them to offer a lower price point. But we'll see if on the call, which is ongoing right now, Melissa, we hear more about plans to hike prices. This always confuses me, Julia, every quarter since they've had an ad-supported tier. What they're basically saying is that their ad-supported tier is in such demand, they need more ad inventory to feed that? Well, it's all about building the marketplace.

2:23I mean, the good news here is that having an ad supported tier allows them to have a much lower price point option that enables them to raise prices for everyone who doesn't want to watch ads. And that's another reason why they expect a price hike coming. But they're saying they just don't have the marketplace here to adequately match the demand for certain type of viewers with the with the availability of ads for those types of viewers. So it's really about having the marketplace because the advantage of ads on Netflix is they can be really targeted. So you need to make sure you have that whole ecosystem and it takes a while to build it.

2:55Yep. Julia, thanks for explaining that. Continue to bring us the headlines. Julia Boorstin from Los Angeles on Netflix, which is up by about a few percent in the after hour session. Karen, what do you make of this quarter? Everything to love about this quarter. Right. I mean, the subscriber, even though they're trying to wean us away from caring about the subscriber growth, but the margins were better. I mean, it was a really, really good quarter. And, you know, when you have revenue growth and you have that kind of business model, you get a marginal subscriber. And that's really good for your margin.

3:25So everything to like about this except the price of the stock. It's expensive. It deserves to be expensive. Clearly, they have one in the streaming space. But, you know, I kind of hold my nose a little bit when I look at the valuation because I wouldn't add here, even though this is great. Right. It was great. Everything was great. So, you know, it's funny. When you look at it on a chart, I'm going to say I would like to sell this little post earnings. And when you look at it on a chart, January through April, stock trough, trough. Then you look at April through August, trough, trough. So it's every four months you get a bottoming effect.

4:06Even though the ascent has been intact, it looks like you get a chance to buy it cheaper. It's always going to be expensive for Karen. It's always going to be expensive for many people. But you have password sharing, ad tier, all of these different things. I think you're going to get a lower price to buy the stock. And I think I would be selling this right now. Would you be leaning into this move, Guy? I mean, Guy, I know this past quarter you've been really tuning in to Cobra Kai and Emily in Paris, Tokyo Swindlers. Just to name a few of the great drivers of engagement that they're citing in the shareholder letter.

4:42Yeah, Tokyo Squidwards is my favorite new show without question. And I think I'm part of that. But, you know, it's interesting. I understand what Karen's saying, and I totally get what Steve's saying. But look at today's low, and I know our crack staff back in EC. Go back to November of 2021 when the stock made an all-time high of about 680 or so, and look at what today's low was. So you back and filled back to a prior high, and now we're bouncing off of it. And, yes, it is expensive on valuations. But I've got to tell you, look at the ad growth and that net ad sales revenue tier. That thing is up 35 % year over year.

5:18That's something that Steve has talked about for a while. So I'm sort of saying, you know what, you stay with it. It is clearly Netflix world still, and everybody else is playing in it. So I would actually buy this strength, Mel. And so why shouldn't there be such a premium? I mean, what are we comparing Netflix against? Who are its closest competitors? I don't even know. Well, they always say sleep. Sleep, right. YouTube. Right. Right. And then all the streamers. Why not a 32 times forward P.E. for this oversleep? Dan, I'm exaggerating. But what Gaia said in terms of this is Netflix's world and we're only living in it, gets to the point that Netflix is the one successful at streaming when all the others or most of the others are falling to the wayside.

6:00Yeah, it's not too different than what some investors are willing to pay for a Spotify too, right? So these two companies are in very unique positions. They are dominating the subscriber growth. But the one issue I'd say with Netflix is just maybe a decel in the subscriber growth as they start to look around the globe here. Obviously, you know, Central and South America, South America in particular, is starting to see, you know, a deceleration. So they really have to make it up in Europe, Middle East, Asia. I really like, I think all of us on the desk, as soon as they kind of did that about face on the advertising business, obviously the crackdown on passwords, this is all really high margin stuff.

6:34You've seen their margins start to work higher a little bit. It's a great story. It's a unique story. I guess it's felt unique for 15 years or so. But again, from a competition standpoint, there's not a lot nipping at their heels a little bit. I'll just say the other thing about Live. As they move into Live, I think that's going to be a really interesting next phase for this company, especially from an advertising standpoint. They create a little bit of a velvet rope situation as they get into some of this stuff, like sports and the like here. So a lot of stuff to like going forward. I wouldn't worry about the valuation.

7:06People are only going to worry about it when they miss on the next time on subscribers and the stock is trading down 10 % or so. But right now, it's probably just fine. I don't think you buy it here for, you know, the technical reasons that Steve mentioned, some of the reasons that Guy mentioned, and Karen's a little worried about. I think that's going to encapsulate a lot of investor opinion over the next few weeks in the name. They've got the Jake Paul-Mike Tyson fight and two NFL games on Christmas Day. So that's... How do you know that? You know everything. It's in the shareholder in the letter, so I have to...

7:36If you have to pick something, I mean, we talked about it before the show. Latin America was actually churn. And until they have some content that makes people want to turn it back on. Right. That was down. Although that is a much less valuable customer than the U.S. Did you see the revenue on the chart that we just put up? So to Dan's point, you have the paid membership kind of rolling over. You have revenue kind of rolling over. So these are things that happen before the stock price kind of rolls over. So we've been all sort of hypnotized with stock price not rolling over. I think it's time for it to roll over.

8:11All right. Well, we are on this webcast. You want to comment? Wait, that was growth rolling over. Not growth. Yes, growth. Sorry. Yes, growth. All right. All right. We'll be speaking to Rich Greenfield a little later on in the show on Netflix. Meantime, Taiwan semi-shoring to a fresh all-time high after a blowout earnings beat. Q3 profit jumping 54 % year over year with revenue surging 36%. The CEO saying that AI demand is real and will continue to grow. The huge move boosting the other chip stocks. NVIDIA hitting its own intraday record. Micron, Broadcom, and AMD moving higher as well, but finishing off the highs of the day.

8:44Even ASML joining today's party, breaking a two-day losing streak. So, to TSM, quite any AI doubters. Dan Nathan, number one AI doubter here on this show. Well, let's be really clear. I'm not an AI doubter about the technology by any means. What I'm doubter about is that, well, no, the pace of spending continues this way relative to what we're hearing from the hyperscalers, which is obviously it's Microsoft, it's Google, and it's Amazon here. So when most companies report over the next few weeks, we're going to get a sense of their spending, right? And so, I don't know. I think there's two different stories on the week.

9:19It's ASML and their lack of visibility, and they're kind of blaming it on stuff, ex-AI, and what Taiwan Semi has. Taiwan Semi is going to be the last battle fought with NVIDIA on this. I just think that as we go into 2025, expectations are really very high, given what NVIDIA and Taiwan Semi are saying. But if you look at the price action, if you look at the forward estimates for the hyperscales that I just mentioned, they're not accelerating in a meaningful fashion. So it's really going to come down to what they say as far as spending, in my opinion, over the next month or so. The comments from TSM were pretty convincing.

9:52They're going to double capacity by the end of the year of their advanced chip packaging technology capacity, which is needed for NVIDIA's highest, most advanced AI chips. That seems to indicate that there is the demand there. That there is the demand that goes much broader than just the hyperscalers, right? Right. So, yeah, though this clearly was good and expectations were really high already going in. So that's pretty impressive. Of course, it bodes well for NVIDIA. I wonder, though, if it's going to run up into what are just ratcheting up the expectations prior to. So it's up on this good news as it should be.

10:28But I don't know what we'll see it by the time it gets to their earnings. Taiwan is dependent on NVIDIA and AMD to the tune of about 15 percent collectively between the two names as far as revenue. When you look at the stock to Dan's point, there's ASML. So there's your non-AI chips and AI chips. You're going to have a backlog of AI chips. That's where the growth is. That's where Taiwan's sweet spot is. And that's where NVIDIA's sweet spot is, and to a lesser extent, AMD. When the market starts to fail, NVIDIA, Taiwan Semi, AMD will be the first ones to fail. So this depends on the market continuing its ascent.

11:12So where do you stand? I would be a seller of these. I would be locking in profit on all of these. So you're out of NVIDIA? So I'm out of NVIDIA, but obviously the last chip to fall is going to be there's such a backlog with artificial intelligence chips that you're going to have that demand ongoing. But they still two thirds of all stocks trade with the overall market. So unless you believe this market is going to go to the moon, which you don't, which I don't because you need a little healthy pullback. I'm not saying there's going to be a 20 percent decline, but there's going to be a short and sweet pullback.

11:48and I'd wait for those as your entrance. Guy, what do you say? It's interesting. You know, we talked about, what's today? Thursday. So Tuesday, ASML, we had a conversation on the desk, and we actually pointed out that, you know, the decline that they were seeing was the non-AI portion of their business. So it really wasn't an indictment yet of AI. But if you start to look out in the future, potentially it could be one of those first dominoes to fall. Taiwan Semi, we've said it 100 times, it's one of the five most important companies in the world, just crossed the trillion-dollar market cap, and justifiably so.

12:21And we got through those prior double tops of$185 ,000. But I look at today and say, you know what? Given what Taiwan Semi said, NVIDIA should have traded a lot better. Now, I'll say this. The move in NVIDIA since the August 5th low has been staggering. But the fact that we didn't close above that June 20th high of$140 ,000 and change, at least today, I think is a little concerning. Oh, so again, that outside reversal day. We go back to that day. Still intact. Still intact, Melissa Lee. No, I understand that. I remember having that conversation right here on the desk, and it's amazing how intact it has been.

12:55But, Karen, you don't trade on technicals. So Steve has made the call that he's willing to give up whatever upside there is. And I think this is the dilemma that most people have with NVIDIA, right? You see the stock continuing to go to record highs. You're like, I don't want to pull the trigger. I don't want to sell. I don't want to sell because I'm worried I'm going to make the next however many points. 10 points or 15, whatever it is. So what do I do? How do you do? How do you weigh that? I look to sell out-of-the-money calls. So you take in some premium. And obviously, if there's a big way down, then, you know, the premium doesn't do you enough good.

13:27But anything sort of flat to up a little, that's good. And you can continue to, you don't have to realize any gains. That's important. And if you are short-term, if you sell calls out at least 30 days, you can keep aging your position to get to long-term. So for me, a lot of it is tax-driven. Right. And I kind of want to stay in it anyway and see what, you know, how does this all. Sure. Right. But at some point, you have to start selling some. And then if it goes through your strike price, then you're going to, if you just let yourself be assigned, you'll have a smaller position. Right. You don't trade in options.

14:03And so you wouldn't be selling calls. But that would be what you should do to protect your position. I go off of level. So when you say I'll give up the upside, I give up the upside to a certain extent. And then once it proves itself, I use that old high as my exit strategy. If I'm wrong again, if I pick the top and it continues to climb, I use that old high as my support level. So if it breaks down through there, I sell the position. If not, I keep accruing it. Dan, if what you predict comes to fruition, NVIDIA could be one of the greatest shorts out there. When does that day come in your view?

14:36What do you look for? Well, let's step back to ASML, okay? So if you have a bookings number that was down 55%, okay, from just quarter over quarter, if you think about that, and they're just saying it's XAI, it just can't be. You can't have that lack of visibility. It just doesn't, you know, so something doesn't square with me on that, okay? So at some point, maybe it'll be this next quarter where NVIDIA talks about insane demand, but like the lead times for those chips are going to be pushed out. So you see a slight deceleration. I don't know. I just think that, again, the cap backs for these biggest customers, 40 % of Nvidia's sales come from Microsoft, Google, Amazon, and Meta.

15:15And at some point, I just think they're going to see a deceleration in their orders, and I think there's some error that's going to come out of it. And just think about from the highs in July to the lows just recently, a month or so ago, I mean, Nvidia sold off 35%, so it's not going to take much. And that was just a market sell-off. That was a sentiment thing. That was a vibe thing. At some point, there'll be a fundamental reason for these stocks to correct, and it can get cut in half. That's just obvious. If it could sell off on a market sell-off 35%, if there's a fundamental reason, it's going to get worse.

15:44Coming up, book your next flight with Uber, the ride-sharing company reportedly in the early stages of eyeing a deal with online travel company Expedia. What it could mean for a push into new markets, that's next. Plus, a new platform out of Robinhood, the online brokerage firm chasing more active traders and bigger stock trades. Details on the new tool and how it can boost their business. Don't go anywhere. Fast Money is back in two.

16:09This is Fast Money with Melissa Lee, right here on CNBC.

16:22Welcome back to Fast Money. Shares of Uber and Expedia on the move today after reports that the ride-sharing company had explored a takeover bid for the travel booking company. But sources familiar with the matter telling our own Deidre Bosa there are no active discussions between the two companies, that a third party broached the deal, and that initial exploration was in the earliest of stages. Uber CEO Dara Khazrashahi was, of course, previously the CEO at Expedia and currently sits on the board. So you can understand why there was that speculation out there. Still, it sort of gets you thinking about, you know, in Uber's quest to be that super app, what that next acquisition could be, Karen.

16:58This is an interesting way of opening sort of the realm of possibility. Yeah, that's not crazy at all, right? I mean, it would seem to fit in so well. Just looking at the balance sheets of each, they could do it either. I mean, they both trade expensively, but they could do a stock merger. But both balance sheets are in good shape. Obviously, the Dara-Kasr-Shawin connection is interesting. Yeah. So I doubt anything hostile would ever happen here. I think it would have to be friendly. But the idea of it is sort of intriguing. This could be another leg of growth, right? I don't think he needs to do it.

17:32I think it is intriguing. I don't think he needs to do it. I think he's already gotten into train and flights, you know, to a certain extent. It would be an expansive dive into it. But I think he's diversified so much within its own platform. They have every aspect that they truly need. They outperform Lyft by a large extent. I think this would just be, I don't want to say wasting money, but I don't think he needs to do this deal. It seems like the analyst community are pretty negative on this sort of idea. Negative in that they say that an acquisition of Expedia would basically drag down growth because Expedia's growth rate is lower, either current or future, than Uber's.

18:16And Uber has stated explicitly, Dan, that they will only use M &A in order to boost growth. And so this would not boost growth. It would boost growth if you were able to cross-sell, if you're able to access a new customer, if you're able to leverage the data, if you're able to leverage the gross margin that Expedia has, like nearly double that of Uber at 89 % or something. This is a layup. This is why Expedia is the E in my zebra trade. I picked a bunch of crap that I thought could get bought out. And this is exactly it. It trades well below a market multiple. You want to see Dara fix this company inside of Uber?

18:52Of course you do. So, I mean, to me, this is like, you know, bankers, give me a ring. I'll get this thing done for you. This makes a lot of sense. I think bankers put this out. Can you just say bankers, give me a ring? I mean, maybe. That's my theory. Give me a ring. But, I mean, think about, you know, for AI, think about Uber. You know, I need, or hey, whatever, I need a car to go catch this flight. I mean, you could do everything seamlessly, right, guy in theory. I think it makes sense. I mean, I'm sort of with Dan on this one. I understand what Steve is saying. But, you know what? But it's still relatively easy.

19:24I would imagine it's somewhat easy deal to integrate and think about it. I mean, he's been on the board of Expedia, so he probably knows the inner workings pretty well. Where there's smoke, there's fire type of thing. But, you know, you look at Uber and they finally, over the last couple of years, have figured it out. And although it's expensive on a trailing basis, on a forward basis, given the EPS growth rate, it's actually still pretty reasonable stock despite the fact it's had this huge run. So they report on Halloween, Mel. Boom. Boom. So I think you own it in earnings, and you stay with this name on the long side.

19:56All right. There's a lot more Fast Monday to come. Here's what's coming up next. Going under the hood on Robinhood's new platform as the brokerage firm chases more active traders and more sizable trades. What they're offering to investors next. Plus cracks in China's Housing Foundation. How the government's attempt to stabilize the property sector fell short. and what investors need to see to believe in a rebound. You're watching Fast Money live from the Nasdaq market side in Times Square. We're back right after this.

20:36Welcome back to Fast Money. Robinhood announcing a new desktop-based trading platform today with the aim of attracting wealthier, more active investors. The platform called Robinhood Legend will offer advanced charting and analysis tools. CEO Vlad Tenev joining CNBC from the Hood Summit in Miami this morning to talk growth at the company and investor optimism. We're seeing broad-based optimism right now across multiple asset classes. I don't think it's just crypto. And, you know, markets shift up and down. The scenario can change very, very quickly. But right now when we talk to our traders, many of whom are at this event, they're expressing a lot of optimism.

21:17So as you might have noticed, Dan and Guy are in Miami. They are at this Robinhood event. So Guy, I don't know if you're talking to people there, if they also have that same optimism in terms of this offering. It's very interesting because this really signifies and underscores how Robinhood is maturing its business. 100%. A couple things. I mean, I used to say the most interesting thing about Robinhood was the name and the hair. But that's changed, and we've talked about it for the last couple years. They've clearly tapped into something. And I will say, much to my chagrin, you know, people come up to me, I'm all excited, and they're like, do you know Melissa Lee?

21:52And, of course, I say, of course I do. But I will tell you, you know, Robinhood might look expensive on valuation, but the energy at this conference and some of the tools they've built, they're going to continue to grow. And, you know, the Robinhood card, they're going to tap into a lot of things that actually make an expensive stock look relatively inexpensive. So I absolutely will tell you to stay with this name, Melissa Lee. By the way, if you meet Guy and Guy says he does know me, he will tell you that I am the meanest person on the planet, which is obviously not true. So don't believe him on that front.

22:23He does do that. He does do that often, all the time, actually. Dan, in terms of Robinhood, the stock, it seems like they're going after sort of that, I don't want to say niche, but sort of the trader that is like a trader who would go to Interactive Broker, sort of a self-directed, educated, wealthier, active trader. It's a prosumer, and we've met dozens of them here, and there are hundreds of them here right now. And a lot of folks are just really excited to marry this trading platform that they've developed a level of affinity for and a brand in the community with the trading capabilities with analytics.