WEBVTT - What's Next For Netflix? Look Ahead To Earnings 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.560 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.279 at Bloomberg dot com slash podcast. Let's keep on that 0:00:22.440 --> 0:00:25.959 Netflix team, shall we. They report earnings next week, and 0:00:26.000 --> 0:00:28.920 that's usually a big event for the stock. Let's welcome 0:00:29.360 --> 0:00:31.880 uh keitha wrong Onah and she is the technology and 0:00:31.920 --> 0:00:34.960 media annalyst at Bloomberg Intelligence. She's been covering this company 0:00:35.040 --> 0:00:38.400 pretty much since its inception as a public company. Keithan, 0:00:38.440 --> 0:00:41.120 thanks so much for joining us here. What can we expect? 0:00:41.159 --> 0:00:46.640 What are investors really looking for when Netflix reports next week? Yeah, 0:00:46.640 --> 0:00:50.120 thank you so much Paul and Taylor for inviting me 0:00:50.159 --> 0:00:53.080 to this conversation. So, um, it's going to be a 0:00:53.200 --> 0:00:57.560 pretty week quarter for Netflix. They have telegraphs that pretty 0:00:57.560 --> 0:01:02.360 well to investors, so they're expecting about one million editions. 0:01:02.400 --> 0:01:05.039 This will be the lowest ever for the company in 0:01:05.080 --> 0:01:07.959 at least ten years, and really it's a factor of 0:01:08.120 --> 0:01:10.959 many different things. So you had that massive pull forward 0:01:11.040 --> 0:01:14.080 of demand from last year because of COVID when they 0:01:14.120 --> 0:01:17.600 reported twenty six million subscribers in the first half of 0:01:18.800 --> 0:01:20.880 that's usually the number that they report for the whole year. 0:01:21.560 --> 0:01:24.200 And then you also have, now, you know, the the 0:01:24.400 --> 0:01:27.920 additional factor of people going wanting to go more outdoors 0:01:27.959 --> 0:01:30.760 and demanding more out of home entertainment. And then the 0:01:30.840 --> 0:01:33.560 third thing that we're seeing is that there was obviously 0:01:33.600 --> 0:01:36.560 the effect of all those production shutdowns, so they had 0:01:36.560 --> 0:01:40.200 a pretty light content slate into Q, none of their 0:01:40.240 --> 0:01:43.000 big titles, So it's really the impact of all those 0:01:43.000 --> 0:01:45.920 three and so a pretty weak quarter is what we're 0:01:45.959 --> 0:01:50.360 expecting in general. With that weak quarter that we're expecting, 0:01:50.400 --> 0:01:52.560 it seems like Netflix is trying to get ahead of 0:01:52.560 --> 0:01:56.720 that announcement and help engagement and help penetration by going 0:01:56.760 --> 0:01:59.920 into video games. What can we expect from net fille 0:02:00.280 --> 0:02:04.600 Alla video games? Yeah, I think that's you know, it's 0:02:04.760 --> 0:02:06.640 it's kind of been in the offering, I think for 0:02:06.640 --> 0:02:09.200 a little while now, and I think it's really a 0:02:09.320 --> 0:02:13.000 very natural extension of their content strategy. I think what 0:02:13.000 --> 0:02:15.839 they're trying to do is to really be a comprehensive 0:02:16.040 --> 0:02:19.839 entertainment solution and really trying to build more and more 0:02:19.880 --> 0:02:22.840 engagement as you pointed out, and really more time spent 0:02:22.960 --> 0:02:25.720 with the platform. Remember a few years ago, when you know, 0:02:25.800 --> 0:02:29.520 read Hingston's was asked about who their biggest competitor competitor is. 0:02:29.960 --> 0:02:33.400 He didn't say an Amazon Prime or or even Hbo. 0:02:33.560 --> 0:02:36.480 He he pointed out Fortnite as being their biggest competitor 0:02:36.520 --> 0:02:39.080 for time and attention. Um, so that's really kind of 0:02:39.120 --> 0:02:41.720 what they want. They want to you know, increase engagement, 0:02:41.720 --> 0:02:44.560 they want to increase time spent. And I think it's 0:02:44.400 --> 0:02:46.359 it really kind of makes sense that it makes it. 0:02:46.440 --> 0:02:48.359 It's a huge oportnity for Netflix to be able to 0:02:48.400 --> 0:02:53.240 differentiate its content offering, boost subscriber engagement, boost retention against 0:02:53.280 --> 0:02:56.440 all the other streaming players. Keithan talked to us about 0:02:57.360 --> 0:03:00.560 the competitive environment again. Over the last year, you know, 0:03:00.600 --> 0:03:03.320 we saw a lot of new players on the streaming business, 0:03:03.320 --> 0:03:06.000 you know, Disney Plus and Peacock and you know all 0:03:06.000 --> 0:03:09.200 the others uh that are out there. Give us a 0:03:09.240 --> 0:03:14.920 sense of how it's shaking out in these early quarters. So, Um, 0:03:14.960 --> 0:03:17.400 as you pointed out, Paul, I mean, Disney Plus has 0:03:17.400 --> 0:03:20.400 been a runaway hit, so they have amassed more than 0:03:20.560 --> 0:03:24.040 hundred million subscribers in you know, just a very short 0:03:24.360 --> 0:03:27.440 about just about thirteen to fourteen months, so they it's 0:03:27.480 --> 0:03:31.119 been a blockbuster success for them. Um and of course, 0:03:31.120 --> 0:03:32.880 as you pointed out, we've had a lot of new 0:03:32.919 --> 0:03:35.440 players kind of a burst down into the screen. But 0:03:35.480 --> 0:03:38.880 I think we're kind of seeing, uh, really this come 0:03:39.200 --> 0:03:42.240 emerged as as as a two horse race, if you will, 0:03:42.280 --> 0:03:45.040 between Netflix and Disney, but you're also seeing all the 0:03:45.080 --> 0:03:47.680 other players kind of trying to jockey for scale. So 0:03:47.720 --> 0:03:51.480 Amazon time very big deals just in the space of 0:03:51.880 --> 0:03:53.880 you know, the past few weeks. They went out and 0:03:53.920 --> 0:03:57.720 acquired the NFL Thursday Night games for about eleven to 0:03:57.760 --> 0:04:01.000 twelve billion dollars and then the NBM studio for another 0:04:01.080 --> 0:04:03.800 eight and a house dollars. So again they really want 0:04:03.800 --> 0:04:06.400 to make Prime a talk to your service. Then you 0:04:06.720 --> 0:04:09.280 then you have HBO Max and the Discovery deal creating 0:04:09.280 --> 0:04:11.400 a new company, a hundred and fifty billion dollar company. 0:04:11.440 --> 0:04:15.120 Again HBO Max wanting to kind of break into that uh, 0:04:15.320 --> 0:04:18.640 top tier streaming offering. So we're definitely going to see 0:04:18.640 --> 0:04:20.080 a shakeout. I think at the end of the day, 0:04:20.120 --> 0:04:23.359 we're probably going to see about three or four or 0:04:23.480 --> 0:04:27.120 five major services Nextlork, Mestics, and Disney and Amazon obviously 0:04:27.520 --> 0:04:30.400 the top one to three I think among those, and 0:04:30.440 --> 0:04:32.120 then it's going to be really interesting to see what 0:04:32.160 --> 0:04:35.720 happens with you know, speak of what happens with viacoms, 0:04:35.880 --> 0:04:40.200 Paramount plus. I think eventually consolidation is on the card, 0:04:41.000 --> 0:04:42.920 but we'll have to wait and watch. There seems to 0:04:43.000 --> 0:04:45.479 be a push pull. We feel like there has to 0:04:45.520 --> 0:04:48.960 be consolidation because you have to be big to compete. 0:04:49.320 --> 0:04:52.200 And yeah, we're getting a lot of big anti trust, 0:04:52.440 --> 0:04:56.280 anti big tech rhetoric out of this administration, saying that 0:04:56.320 --> 0:04:59.800 they don't like big companies. They want to promote competition. 0:05:00.560 --> 0:05:03.720 Do you expect deals to get done and and do 0:05:03.839 --> 0:05:06.039 they get done or they can be tied up in 0:05:06.080 --> 0:05:09.760 courts for a while. Yeah, So even with the that's 0:05:09.760 --> 0:05:12.040 a great point. I think even with the Amazon deal, 0:05:12.080 --> 0:05:14.440 I mean we have the new you know, FTC chair 0:05:14.480 --> 0:05:16.800 who kind of expressed some reservations about that. But I 0:05:16.800 --> 0:05:18.880 don't think they're necessarily if you kind of just look 0:05:19.680 --> 0:05:21.719 at the business that you know, any of these big 0:05:21.720 --> 0:05:25.320 tech players are in, I don't think they necessarily pose 0:05:25.440 --> 0:05:30.640 any competitive challenges right Acquiring a studio acquiring a media company. Um. Again, 0:05:30.680 --> 0:05:33.280 I'm not really sure about how long it could be 0:05:33.320 --> 0:05:35.960 tied up in courts, but I think ultimately, um, you know, 0:05:36.040 --> 0:05:38.279 if tex players like an Apple or an Amazon wants 0:05:38.279 --> 0:05:40.479 to go on studio, I think they should be able 0:05:40.520 --> 0:05:43.800 to do so without too much hassle. Keith A real 0:05:43.839 --> 0:05:46.880 quick thirty seconds. Is Netflix still a subscriber growth story? 0:05:46.920 --> 0:05:50.160 I see the stocks flat year to date. Um, so 0:05:50.200 --> 0:05:52.560 they have done a really good job, Paul, and kind 0:05:52.560 --> 0:05:55.239 of moving away a little bit from that over focus 0:05:55.320 --> 0:05:57.880 on subscribers. They're really now focusing more on free cash 0:05:57.920 --> 0:06:01.479 flows on margins, and they're showing some real, really good 0:06:01.560 --> 0:06:04.480 numbers on that front as well. All right, Keithan, thank 0:06:04.480 --> 0:06:06.600 you so much for joining us. As always, you are 0:06:06.640 --> 0:06:09.719 our guru for all things t MT. Keith Wrong and Nothing, 0:06:10.240 --> 0:06:13.240 technology and media analyst for Bloomberg Intelligence joining us on 0:06:13.279 --> 0:06:17.039 the phone from New Jersey. Uh. I hired Githa back 0:06:17.080 --> 0:06:19.760 in the day. We worked together for ten days or 0:06:19.760 --> 0:06:21.960 ten years, and she has just developed into one of 0:06:21.960 --> 0:06:24.760 the top media and now technology analysts on Wall Street. 0:06:24.760 --> 0:06:26.280 And we're fortunate to have her and all the other 0:06:26.839 --> 0:06:33.719 good folks at a Bloomberg intelligence. Let's talk about retail sales. 0:06:34.279 --> 0:06:38.080 Got some numbers this morning. Came in better than expected. 0:06:38.120 --> 0:06:41.080 Retail sales came into zero point six percent gain versus 0:06:41.080 --> 0:06:43.960 a forecast of a zero point three decline. So pretty 0:06:44.000 --> 0:06:45.920 strong there. Let's get some details on that and some 0:06:45.960 --> 0:06:48.760 of the other retail issues out there in the U 0:06:48.800 --> 0:06:51.800 S consumer. We do that with A. G. Solanki, national 0:06:51.839 --> 0:06:54.840 director for Retail in the US for Collier's International, joins 0:06:54.920 --> 0:06:57.560 us on the zone from phone from San Francisco and Chie, 0:06:57.560 --> 0:06:59.599 thanks so much for taking the time, love to get 0:06:59.680 --> 0:07:04.280 your kind of foot snapshot on the US consumer right 0:07:04.320 --> 0:07:06.440 here as we slowly come out on the other side 0:07:06.440 --> 0:07:10.040 of this pandemic. Yeah, thanks for having me. So let's 0:07:10.080 --> 0:07:12.440 just just dive in. So what we're seeing right now 0:07:12.680 --> 0:07:18.120 is definitely we saw certain categories in retail I e. Clothing, uh, 0:07:18.240 --> 0:07:24.239 certain F and B categories, department store sales drop anywhere between, 0:07:26.440 --> 0:07:29.680 and of course conversely, we saw the e commerce jump in. 0:07:29.800 --> 0:07:32.720 Right now, we're starting to see a shift. People are 0:07:32.760 --> 0:07:36.440 definitely coming back strong as it relates to buying power 0:07:36.600 --> 0:07:40.080 in store, and with that, we're starting to see in 0:07:40.160 --> 0:07:45.200 certain sectors a rebound. For example, in apparel increase. It's 0:07:45.240 --> 0:07:49.360 the largest increase we've seen thus far in any category. 0:07:49.840 --> 0:07:52.360 And also in addition to that, we're starting to see 0:07:52.800 --> 0:07:56.520 um store expansion. So this is led by the grocery, 0:07:56.640 --> 0:08:01.200 the home, beauty, and value oriented concepts. So new store 0:08:01.320 --> 0:08:04.520 openings right now or outpacing store closing, so we're pretty 0:08:04.560 --> 0:08:10.040 excited about that. How are consumers feeling about paying higher prices? 0:08:10.160 --> 0:08:15.120 On one hand, you have retail sales that looked relatively 0:08:15.360 --> 0:08:19.320 strong today, but then you're seeing consumer sentiment fall because 0:08:19.400 --> 0:08:22.760 inflation expectations in the next year are expected to be 0:08:22.800 --> 0:08:25.400 the highest since two thousand and eight. Are they willing 0:08:25.440 --> 0:08:30.240 to pay these higher prices? So there is definitely a 0:08:30.320 --> 0:08:33.080 concern around that, I think because there's this um you know, 0:08:33.160 --> 0:08:35.880 kind of the stimulus payment of starting to slowly fade away, 0:08:36.120 --> 0:08:38.600 so they haven't really put a percent of their mindset 0:08:38.640 --> 0:08:43.040 into Hey, we're looking at inflation of some sort and pricing, 0:08:43.400 --> 0:08:46.200 so there's still a spend, a strong spend, and what 0:08:46.280 --> 0:08:49.480 we're seeing from that strong spend occur is in what 0:08:49.559 --> 0:08:54.040 I would say more the service oriented side. So going 0:08:54.120 --> 0:08:58.040 to the getting a massage, going for a pedigure, mannic here, 0:08:58.080 --> 0:09:01.520 getting your hair done, um, the hair salons, et cetera. 0:09:01.679 --> 0:09:05.120 So we're still seeing that momentum um. When we I 0:09:05.160 --> 0:09:07.680 think it will start to fade, maybe we'll probably see 0:09:07.720 --> 0:09:11.840 those results closer to Q three Q four. So Andie, 0:09:11.880 --> 0:09:13.440 one of the things we saw from this from the 0:09:13.440 --> 0:09:16.240 retail perspective during this pandemic is what a lot of 0:09:16.240 --> 0:09:18.600 folks are saying is just you know, this accelerating growth 0:09:18.600 --> 0:09:21.000 of e commerce, and maybe it might have pulled maybe 0:09:21.040 --> 0:09:23.080 two or three years worth of market share gains in 0:09:23.160 --> 0:09:25.600 terms of e commerce in terms of relative to total 0:09:25.679 --> 0:09:28.319 re retail sales, maybe poured it, pulled it forward maybe 0:09:28.320 --> 0:09:31.000 by two or three years. Is that in fact the case? 0:09:31.040 --> 0:09:32.880 And do you think some of those e commerce gains 0:09:32.920 --> 0:09:37.199 are here to stay? Um? I don't do not believe 0:09:37.200 --> 0:09:39.280 they are here to stay. I think they are a 0:09:39.280 --> 0:09:43.840 part of our shopping journey for any UM consumer. However, 0:09:43.880 --> 0:09:45.319 what we're starting to see is a bit of a 0:09:45.360 --> 0:09:48.880 cutback as it relates to e commerce, and our Q 0:09:49.080 --> 0:09:51.960 two numbers that we're forecasting are roughly around thirteen point 0:09:52.000 --> 0:09:56.720 six percent compared to Q two so UM, granted, it 0:09:56.800 --> 0:09:59.439 was kind of an off quarter, but nonetheless we're starting 0:09:59.440 --> 0:10:02.120 to see a stay realization, and I think that people 0:10:02.120 --> 0:10:04.320 are still there's still you know, when we look at 0:10:04.760 --> 0:10:08.520 the square footage in terms of UM per person square 0:10:08.559 --> 0:10:11.760 footage of retail, it's still pretty significant. People want to 0:10:11.760 --> 0:10:17.480 be out there. Are we finding enough workers to come 0:10:17.520 --> 0:10:22.840 back to work? Good question. Yeah, that's that's a great question. Honestly, 0:10:22.960 --> 0:10:25.880 it's been a big struggle some quick things that we've 0:10:25.880 --> 0:10:29.720 been hearing, especially with chain restaurants and fast casual. What 0:10:29.800 --> 0:10:32.320 we're seeing in that, you know, in that area is 0:10:32.360 --> 0:10:34.840 that it has been a struggle. So what are they doing? Well, 0:10:35.160 --> 0:10:38.640 they've identified some interesting ways to get around it. First off, 0:10:38.760 --> 0:10:41.319 we're seeing a lot of the chain restaurants being quite 0:10:41.320 --> 0:10:44.120 creative with how they're approaching or how they're getting out 0:10:44.160 --> 0:10:47.960 there to identifying new employees. So we're not seeing too 0:10:48.040 --> 0:10:52.280 much of an overpaying or arise in wages, but we're 0:10:52.280 --> 0:10:54.920 seeing some interesting things of how they're kind of connecting 0:10:54.960 --> 0:10:59.520 with you know this you know, the employees um and 0:10:59.559 --> 0:11:02.199 that's either through TikTok. So a lot of the brands 0:11:02.240 --> 0:11:05.360 are starting to use TikTok to um really get the 0:11:05.360 --> 0:11:08.000 brand awareness out there, to use that as a way 0:11:08.000 --> 0:11:10.720 of putting out you know, getting resumes in and out 0:11:11.160 --> 0:11:13.800 UM and trying to tap into kind of that younger set. 0:11:14.200 --> 0:11:16.600 So that's one. The other thing that we're I found 0:11:16.720 --> 0:11:20.560 very interesting is that they're actually offering signing bonuses. Some 0:11:20.960 --> 0:11:24.400 brands are offering signing bonuses UM to get people in. 0:11:24.960 --> 0:11:28.320 So it's it's we'll start to see some shifts there. 0:11:28.440 --> 0:11:31.360 But for the most part, specifically when it comes to 0:11:31.640 --> 0:11:36.520 labor and restaurants, UM, they are still challenged. We're seeing 0:11:36.559 --> 0:11:42.640 that with kind of reduced menu offerings, reduced operating hours, etcetera. Uh, 0:11:42.720 --> 0:11:46.240 and so they have to be creative today. I think 0:11:46.280 --> 0:11:48.440 some of the retailers are pretty creative during this pandemic. 0:11:48.480 --> 0:11:50.720 One of them was this curbside pickup. That's a pretty 0:11:50.760 --> 0:11:53.680 cool thing. I kind of enjoy that. Is that going 0:11:53.720 --> 0:11:57.240 to state? Do you think? Oh? Most definitely. We're actually 0:11:57.240 --> 0:12:02.240 starting to see um, you know, letters of intent requesting 0:12:02.360 --> 0:12:06.040 or requiring curbside pick up. So when I was speaking 0:12:06.080 --> 0:12:09.400 with a variety of national retailers, I said, how is 0:12:09.440 --> 0:12:13.040 that you helped or not helped having curbside? Is it 0:12:13.080 --> 0:12:16.160 an added expense? They said, not at all. It's actually 0:12:16.160 --> 0:12:20.040 a convenience to our customer. And it's another channel of 0:12:20.040 --> 0:12:24.439 how we can um provide another solution for that that 0:12:24.559 --> 0:12:26.640 customer where if they don't feel like they want to 0:12:26.640 --> 0:12:27.959 come into the store and they just want to pick 0:12:28.000 --> 0:12:31.200 it up curbside, they have that flexibility and so that's 0:12:31.200 --> 0:12:33.760 really important to them. They've seen a lift in sales 0:12:34.080 --> 0:12:39.200 anywhere between twelve and FI. Yeah, that's pretty pretty interesting 0:12:39.280 --> 0:12:42.920 seeing retailers get pretty creative on j Slanki, national director 0:12:42.920 --> 0:12:46.440 Retail for in the US for Collier's International, giving us 0:12:46.480 --> 0:12:50.000 her thoughts on the retail landscape again generally pretty strong 0:12:50.040 --> 0:12:55.760 as consumer confidence continues to rebound. All right, So we 0:12:55.840 --> 0:12:58.720 are getting right into the meat of this earning season 0:12:58.720 --> 0:13:00.320 and there's a lot of folks out there. It's a boy, 0:13:00.320 --> 0:13:02.920 these earnings are really better come through because when you 0:13:02.920 --> 0:13:05.280 look at valuations, you can make the argument that a 0:13:05.320 --> 0:13:08.760 lot of these uh parts of the market are overextended 0:13:08.800 --> 0:13:12.760 from evaluation perspective. Josh Wine, portfolio manager at Hennessey Funds, 0:13:12.880 --> 0:13:14.800 joins as Josh, I love to get your thoughts on 0:13:14.920 --> 0:13:17.800 kind of what you need to see, what you expect 0:13:17.880 --> 0:13:21.120 to see out of this earnings season here as it 0:13:21.160 --> 0:13:24.679 relates to you know, kind of maybe earnings and valuations 0:13:24.679 --> 0:13:27.640 in this market. Yeah, it's good to be with you. 0:13:27.679 --> 0:13:29.800 I have a spell in my face hearing about karaoke 0:13:29.880 --> 0:13:31.400 and Dolly part and that's a great way to start 0:13:31.440 --> 0:13:33.480 this out. The world is a better place for my 0:13:33.559 --> 0:13:37.040 not doing karaoke as well. Um yeah, earning season, uh, 0:13:37.120 --> 0:13:39.480 you know, certainly want to see the consumer so as 0:13:39.640 --> 0:13:41.920 as companies roll out earnings. You know, it was very 0:13:41.920 --> 0:13:44.040 interesting to see bank earnings and I think it was expected, 0:13:44.080 --> 0:13:46.480 you know, very strong earnings there. But you know, we 0:13:46.559 --> 0:13:49.360 have a retail sales number today that was well ahead 0:13:49.400 --> 0:13:53.320 of expectations, and things like clothing and electronics and restaurants 0:13:53.320 --> 0:13:56.160 were you know, above above average growth and and ahead 0:13:56.200 --> 0:13:59.360 of expectations. So you know, it is what it is, 0:13:59.400 --> 0:14:01.280 and it would be great to hear, you know, some guidance. 0:14:01.320 --> 0:14:04.240 You know, what are you know, companies thinking about, you know, 0:14:04.280 --> 0:14:06.559 the next quarter. You know, right now we have very 0:14:06.600 --> 0:14:09.600 easy comparisons to a year ago. But you know, let's see, 0:14:09.800 --> 0:14:10.920 you know, what it's going to look like in Q 0:14:11.080 --> 0:14:15.520 four when the comparison is is meaningfully more difficult, and 0:14:15.559 --> 0:14:18.280 certainly Q one of next year it will be somewhat 0:14:18.280 --> 0:14:21.960 of a regular comparison to Q one of this year. Josh, 0:14:22.000 --> 0:14:25.360 how are you investing in this time when you get 0:14:25.440 --> 0:14:28.760 strong retail sales but then you see consumer sentiment coming 0:14:28.840 --> 0:14:33.600 really soft given one year inflation expectations are going back 0:14:33.640 --> 0:14:36.200 the highest since two thousand and eight. How do you 0:14:36.320 --> 0:14:41.720 take to contradicting factors and invest Yeah, it's interesting because 0:14:41.720 --> 0:14:44.360 you know, I was looking, you know, the market, you know, 0:14:44.440 --> 0:14:47.240 twenty times forward earnings, so about a five percent earnings 0:14:47.280 --> 0:14:50.400 yield against the backdrop of a one three on the tenure. 0:14:50.960 --> 0:14:55.960 So you know, valuations on average are incredibly compelling. You 0:14:55.960 --> 0:14:59.320 know that they're basically that's spread the earnings yield versus 0:14:59.320 --> 0:15:02.600 the ten years were we were before the pandemic started. Uh. 0:15:02.800 --> 0:15:07.640 That being said, you know, yeah, certainly size matters a 0:15:07.640 --> 0:15:10.760 lot in this market increasingly so. So you know, a Microsoft, 0:15:11.280 --> 0:15:15.520 great company, thirty four times forward earnings. When I see that, 0:15:15.600 --> 0:15:18.040 and they're growing quite nicely, but I think to myself 0:15:18.080 --> 0:15:21.240 that the market definitely places a premium on growth. I 0:15:21.240 --> 0:15:24.240 think more so in the case of a Microsoft, it's 0:15:24.280 --> 0:15:26.520 not only a great balance, but just the size and 0:15:26.560 --> 0:15:29.240 the liquidity. So I think that there's definitely a size 0:15:29.240 --> 0:15:32.880 and liquidity story, and what gets blocked out by that 0:15:33.400 --> 0:15:36.400 by that sun is you know, kind of midcaps with 0:15:36.440 --> 0:15:41.640 a similar valuation story and you know, compelling growth, but 0:15:41.920 --> 0:15:44.240 certainly the multiples are not there, and I think that 0:15:44.480 --> 0:15:47.840 you know in that lies you know a great opportunity. Josh, 0:15:47.880 --> 0:15:51.240 where are you and your team at Hennessey Advisors in 0:15:51.360 --> 0:15:54.160 Chapel Hill, North Carolina. I don't know why you didn't 0:15:54.160 --> 0:15:58.680 locate in Durham Superior University down there, but anyway, what 0:15:58.720 --> 0:16:01.240 are you and your team doing in terms of work 0:16:01.320 --> 0:16:04.480 right now? What are the areas you're focusing on? Sure? Yeah, 0:16:04.520 --> 0:16:06.840 so I would point you know, in our Hennessy Cornerstone 0:16:06.840 --> 0:16:09.880 mad Cap thirty fund, where we're looking at valuation, earnings, 0:16:09.880 --> 0:16:13.160 growth and stock price momentum. And where that leads us 0:16:13.480 --> 0:16:15.640 is a lot of the consumer names that you know, 0:16:15.720 --> 0:16:17.760 don't get the attention of of you know, maybe like 0:16:17.760 --> 0:16:20.320 a Costco or a Starbucks. You know, these are MidCap names, 0:16:20.960 --> 0:16:26.280 UH companies like Mattel, Big Lots UH and Meritage Homes, 0:16:26.320 --> 0:16:30.200 so you know, strong free cash flow generating companies, you know, 0:16:30.240 --> 0:16:33.920 strong balance sheets. The multiples are interesting to me because 0:16:33.920 --> 0:16:36.160 I think these are for the most part well known names. 0:16:36.200 --> 0:16:39.000 But you know, Big Lots trading at nine times for earnings, 0:16:39.360 --> 0:16:45.360 Mattel at sixteen times, Meritage at about six times for earnings. So, uh, 0:16:45.440 --> 0:16:48.920 you know, I think that that you know, value can 0:16:48.960 --> 0:16:51.040 be its own catalyst. And and I don't think a 0:16:51.040 --> 0:16:52.720 lot of people agree with that, but I think that 0:16:53.160 --> 0:16:56.000 these names, they are strong names, and they will live 0:16:56.040 --> 0:16:59.320 to see another day and and at some point investors 0:16:59.320 --> 0:17:03.400 will inevitable a U turn their attention towards these overlooked 0:17:03.480 --> 0:17:09.359 type names. What is the path forward for interest rates? It? 0:17:09.640 --> 0:17:11.800 Does it have to go higher from here? How are 0:17:11.840 --> 0:17:15.120 you thinking about that? Yeah? I think about it a lot. 0:17:15.200 --> 0:17:18.480 So I've covered equities in in some way, shape or 0:17:18.480 --> 0:17:21.280 form for about twenty five years, and I've never paid 0:17:21.400 --> 0:17:23.359 that much attention to the bondo market as much as 0:17:23.359 --> 0:17:25.879 I do now. And first of all, you know, the 0:17:25.920 --> 0:17:28.120 bond market to me, you know, there might be some 0:17:28.680 --> 0:17:31.160 Obviously the FED is gets in the way of maybe 0:17:31.280 --> 0:17:34.560 true price discovery to a large degree, but the bond 0:17:34.600 --> 0:17:37.919 market is telling me that maybe we are borrowing some 0:17:37.960 --> 0:17:40.720 growth from future quarters now that we've reopened, and there's 0:17:40.760 --> 0:17:43.760 this delayed wealth effects, so people are out spending money, 0:17:43.800 --> 0:17:45.960 and uh, you know, you see that if you just 0:17:46.000 --> 0:17:48.600 walk down any and he needs, you know, any street 0:17:48.640 --> 0:17:52.400 in this country probably, And uh so, I think that 0:17:53.359 --> 0:17:56.920 we've been saying for so many years now that rates 0:17:56.960 --> 0:18:00.800 have to go higher, and every year that becomes less 0:18:00.840 --> 0:18:02.520 and less true, and and so yeah, I don't think 0:18:02.560 --> 0:18:05.199 they have to go higher. I think rates, you know, 0:18:05.320 --> 0:18:09.120 versus overseas rates are are somewhat elevated in the United States. 0:18:09.440 --> 0:18:12.880 And when I look at overseas markets and economies they 0:18:12.880 --> 0:18:15.520 are in no, they are not nearly as good a 0:18:15.560 --> 0:18:17.800 shape as we are here in the United States for 0:18:17.880 --> 0:18:20.320 the most part. So I think that we have a 0:18:20.320 --> 0:18:23.160 lot to contend with overseas and in emerging markets, and 0:18:23.800 --> 0:18:26.800 I don't know how sustainable things could ever be if 0:18:26.920 --> 0:18:30.680 we don't get those economies reopened and functioning properly. So 0:18:31.640 --> 0:18:33.040 you know, I'm not going to make any prediction on 0:18:33.040 --> 0:18:36.359 the tenure or bonds in general, but you know, I 0:18:36.359 --> 0:18:38.320 don't think rates have to go higher at all, and 0:18:38.359 --> 0:18:40.640 I think they could go a little bit lower. All right, Josh, 0:18:40.640 --> 0:18:43.160 thank you so much. We appreciate that. As always Josh 0:18:43.160 --> 0:18:45.840 Way and he's a portfolio manager at Tennessee Funds giving 0:18:45.920 --> 0:18:49.479 us his thoughts on the market. Uh. Here it remains 0:18:49.520 --> 0:18:52.880 bullish here, but earnings coming in fast and furious will 0:18:52.880 --> 0:18:55.240 continue next week. We had the banks this week, as 0:18:55.320 --> 0:18:58.000 Josh mentioned, coming in pretty starn solid. But we're gonna 0:18:58.000 --> 0:19:00.520 have some tech. We're gonna have some consumer names next 0:19:00.520 --> 0:19:04.000 week that will continue the narrative on earnings and this market. 0:19:04.080 --> 0:19:10.760 This is Bloomberg looking at Moderna here stock is up 0:19:10.840 --> 0:19:14.960 nine point eight percent all time high four dollars. Uh 0:19:14.960 --> 0:19:17.320 it's got sporting a market cap of a hundred and 0:19:17.359 --> 0:19:21.520 fourteen billion dollars included today in the SMP five hundred, 0:19:21.760 --> 0:19:25.080 of course, manufacturer of the Moderna vaccine, which has been 0:19:25.119 --> 0:19:28.800 so successful for so many patients for this COVID. Let's 0:19:28.800 --> 0:19:30.880 get a sense of what's going on at this company. 0:19:30.920 --> 0:19:34.320 That's now you probably started the you know, two years ago, 0:19:34.359 --> 0:19:36.840 nobody really knew about it. Now it's a household name. 0:19:37.160 --> 0:19:40.280 John Murphy, he's a pharmaceutical analyst for Bloomberg Intelligence based 0:19:40.320 --> 0:19:43.840 in London. He joins us, John, tell us about this company. 0:19:43.880 --> 0:19:46.720 Give us a thirty thou foot overview of what this 0:19:46.760 --> 0:19:49.119 company really is. We know it, as you know, a 0:19:49.160 --> 0:19:52.080 manufacturer of a very effective vaccine. But give us a 0:19:52.080 --> 0:19:55.120 sense of what this company is about. Sure, yeah, nice 0:19:55.119 --> 0:19:57.440 to join you. Actually you summed it up very nice. 0:19:57.440 --> 0:19:59.399 That we hadn't really heard about this company, had we 0:19:59.440 --> 0:20:02.399 a couple of years ago. Now it has been around since, 0:20:03.480 --> 0:20:05.879 but only came to the market in two thousand and eighteen, 0:20:05.960 --> 0:20:07.560 and it was a I guess a bit of a 0:20:07.600 --> 0:20:09.960 minnow then, although at the time it created a splash 0:20:10.040 --> 0:20:12.080 because it's i p O was seven and a half billion, 0:20:12.200 --> 0:20:16.120 so for a biotech that that was quite significant. So 0:20:16.440 --> 0:20:19.800 M R and A based a vaccine focused looking at 0:20:19.840 --> 0:20:23.239 a number of different infectious diseases. You could argue they 0:20:23.280 --> 0:20:25.080 maybe got a little bit lucky or got a big 0:20:25.160 --> 0:20:27.440 leg up when COVID came along, because clearly there was 0:20:27.480 --> 0:20:29.720 a lot of cash that that came their way. But 0:20:29.800 --> 0:20:32.200 they have for for a number of years been looking 0:20:32.240 --> 0:20:35.760 at areas such as flu rs V, side of megalovirus, 0:20:36.119 --> 0:20:41.280 so really looking to to develop a broad pipeline of 0:20:41.280 --> 0:20:44.760 of vaccines in the anti infective space. And again, as 0:20:44.800 --> 0:20:48.120 I said, they clearly benefited from COVID here in terms 0:20:48.200 --> 0:20:51.159 of getting an acceleration in development. And I guess the 0:20:51.280 --> 0:20:54.119 question now is after COVID, where do things go? That 0:20:54.320 --> 0:20:56.600 is the question. What is the future for this company. 0:20:56.640 --> 0:20:59.320 We had a great conversation earlier this week talking about 0:20:59.600 --> 0:21:03.000 using at m R and a technology for cancer for HIV. 0:21:03.160 --> 0:21:06.760 I mean, the hopes here are so high. Yeah, I 0:21:06.800 --> 0:21:09.159 think you're exactly right now. And and you know what, 0:21:09.320 --> 0:21:12.400 sometimes I think, um, and it's kind of natural that 0:21:12.480 --> 0:21:16.040 when you see a new technology, expectations initially are high, 0:21:16.359 --> 0:21:19.080 they get they then they get a little bit disappointed, 0:21:19.119 --> 0:21:21.720 if you like, when when these high expectations aren't met. 0:21:21.760 --> 0:21:23.600 And now we're kind of going up to that to 0:21:23.680 --> 0:21:25.959 that peak again. So I think if you look at 0:21:25.960 --> 0:21:28.560 the anti infective areas again, as I mentioned the lights 0:21:28.600 --> 0:21:31.920 of flu, rs V, sites of megalovirus, these are probably 0:21:31.960 --> 0:21:34.879 more realistic in the next three to five years to 0:21:34.960 --> 0:21:37.600