Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's bring it, Dan Morgan,
Speaker 1: He's senior portfolio manager at Sonova's trust company. They've got
Speaker 1: about nineteen billion dollars in assets under management. Dan, I
Speaker 1: know you are looking closely at your Bloomberg terminal. In
Speaker 1: terms of the news from Netflix just in the last
Speaker 1: nine minutes. What sticks out to you.
Speaker 2: Hi, Tim, I'm alli. Yeah, it looks like overall from
Speaker 2: Ernie's per share and revenue number, it looks pretty strong.
Speaker 2: I heard Scarlett mentioned earlier about the expectations coming into
Speaker 2: this quarter being so high. In the stock trading way up.
Speaker 2: I believe it's up over forty five percent year to date.
Speaker 2: You know, Tim, I had a whisper number on new
Speaker 2: subs for the third quarter anywhere from six to seven million.
Speaker 2: I know they'd beat the consensus.
Speaker 1: That's like the whisper number that Style was talking about.
Speaker 2: Yeah, so they came in with five point zero seven.
Speaker 2: You mentioned the stock is trading down a little bit.
Speaker 2: I just think there wasn't a lot of room for error.
Speaker 1: Well, now it's it started trading down. Now it's hired
Speaker 1: by three point five percent.
Speaker 2: Okay, there we go, but go ahead. Sorry, they came
Speaker 2: up a little bit short on that whisper number and
Speaker 2: turn to pay subs on the third court.
Speaker 1: Hey, okay, Molly's a ton of questions. I know you do.
Speaker 1: Can I just all.
Speaker 3: About love is blind? But you can go first.
Speaker 1: I just want to know what what are you going
Speaker 1: to do? What's an investor going to do when they
Speaker 1: stop with this sub number in twenty twenty five?
Speaker 2: You know you're right, Tim, It's going to be a
Speaker 2: tough sled because you know, we really value Netflix based
Speaker 2: on these sub numbers. I hate to say this, but
Speaker 2: I think what's going to happen and you already see
Speaker 2: this with Apple. You know, Apple will give us no longer,
Speaker 2: you know, different unit volumes on iPhones and iPads and
Speaker 2: so forth, they'll get, you know, they we'll get estimates
Speaker 2: based on revenue by segment, but then a lot of
Speaker 2: analysts will back you know, through average selling prices and
Speaker 2: come up with a unit projection. And I hate to
Speaker 2: say it, guys, but I don't think this is going
Speaker 2: to go a way. I think what you're going to
Speaker 2: see is some estimates based on the revenue numbers in
Speaker 2: terms of what that sub number is, because you know,
Speaker 2: in the past, we've just always traded the stock based
Speaker 2: on how many new members did you sign up for
Speaker 2: the quarter and how many were you signed up next quarter? Right?
Speaker 3: I mean, what's like the next natural key metric then
Speaker 3: for you both to predict and then also to trade
Speaker 3: off of.
Speaker 2: You know, Molly, It's kind of funny because you know,
Speaker 2: we think about like how we trade Microsoft and Amazon
Speaker 2: and all these different stocks based on their ability to
Speaker 2: generate AI revenue, right, And I think it's gonna be
Speaker 2: the same thing here with Netflix. Instead of AI, we're
Speaker 2: going to just be zeroing in on that advertising. You know,
Speaker 2: if we think of what are the catalysts going forward
Speaker 2: for this company. You guys mentioned earlier about a potential
Speaker 2: price increase that's in the mix. They also have that
Speaker 2: paid sharing which we've talked about before and migrating people
Speaker 2: over that. But I think there's a lot of people
Speaker 2: who are hopeful that this AD model will be a
Speaker 2: big generator for them. We have to bear in mind
Speaker 2: about forty five percent of their sign ups, their new
Speaker 2: sign ups are going towards the AD tier model. It's
Speaker 2: about six ninety nine a month.
Speaker 1: Is that is that around the world.
Speaker 2: Which is about fifteen ninety nine.
Speaker 1: I'm sorry, is that around the world.
Speaker 2: Or is that yeah?
Speaker 1: No, is that just an ul like what markets? Is
Speaker 1: that in Dan?
Speaker 2: That would be across the board to him in terms
Speaker 2: of any new subs that they're signing up. In terms
Speaker 2: of across the board, like I said, about forty five percent.
Speaker 2: And you know, as of the end of this year,
Speaker 2: they're projecting now let's say they've got two hundred and
Speaker 2: eighty two hundred eighty five million total subscribers, they should
Speaker 2: have about thirty one million advertising subscribers. So it is
Speaker 2: becoming a bigger piece of the pie for them. It's
Speaker 2: not quite huge, but at least it's over ten percent.
Speaker 1: Shares now hired by five percent in the after hours.
Speaker 3: Just how do you think though about Like I just
Speaker 3: I still find like this decision. I know that this
Speaker 3: is and this isn't the new thing here, but the
Speaker 3: decision to not publish the subscriber numbers so interesting, like.
Speaker 1: Every quarter, even though they announced it a few quarters ago, right,
Speaker 1: just like a harp on it.
Speaker 3: I mean, it just sounds to me like you're almost
Speaker 3: like acknowledging like that the company is moving into like
Speaker 3: a new phase, like maybe like you know that you
Speaker 3: were like maybe a growing company, now you're a more developed,
Speaker 3: mature company.
Speaker 1: I think that is absolutely the correct take.
Speaker 3: Yeah, I mean, but you obviously, like from an investor perspective, like,
Speaker 3: I don't know, Dan, like, do you accept that or
Speaker 3: do you I mean, it just kind of to me
Speaker 3: sounds like I'm almost a little sad in a way,
Speaker 3: like I kind of I always look forward to that
Speaker 3: number is kind of like new and exciting, And I mean,
Speaker 3: how do you view it? Do you think this is
Speaker 3: just a natural maturation of the company.
Speaker 2: I think so, Mollie. And nothing to remember too is
Speaker 2: that the you know, the average revenue they get per
Speaker 2: subscriber in terms of advertising subscriber versus let's say a
Speaker 2: standard subscriber is less. So that could be another reason
Speaker 2: they felt they wanted to migrate to kind of a
Speaker 2: revenue volume based you know, matrix opposed to subs, because
Speaker 2: the subs didn't have as much value that they might
Speaker 2: if it was purely a standard. But you know, Tim
Speaker 2: and Molly, I would agree with you that. I think
Speaker 2: at this point we have to look at Netflix much
Speaker 2: differently than we did two or three years ago. They
Speaker 2: have become a more mature company. You mentioned the cash
Speaker 2: flow numbers that they gave for the physical year being
Speaker 2: above expectations. I think with six to six point five billion.
Speaker 2: They also beat for the quarter. So they they're just
Speaker 2: kind of a different animal than they were let's say
Speaker 2: two or three years ago. Was kind of just add
Speaker 2: as much content as you can, try to get as
Speaker 2: many subs as you can, and don't worry about it.
Speaker 2: And now they've become more kind of a cash flow
Speaker 2: you know story, more of a story of slower top
Speaker 2: line growth. I know Romain mentioned top line growth slowing
Speaker 2: down in subsequent years going forward, and I think the
Speaker 2: streets kind of accepted that. And you know, you look
Speaker 2: at the current multiple, you're looking like thirty five, you know,
Speaker 2: to forty times earning. This stock used to trade, you know,
Speaker 2: close to over one hundred times earning. So the multiple
Speaker 2: has come down in line with the expectations in terms
Speaker 2: of growth.
Speaker 3: Well let's stick on that multiple for a second, because
Speaker 3: we had a great story on the terminal earlier about
Speaker 3: this today about just how expensive Netflix trades right now
Speaker 3: relative to earnings. I mean, if you're like somebody who's
Speaker 3: looking to get in on this stock, right now that's
Speaker 3: up like three hundred and fifty percent in the last
Speaker 3: two years. Like, I don't know, is there a good
Speaker 3: entry point or did you miss it?
Speaker 2: Yeah, So right now you're trading about thirty seven times
Speaker 2: twenty four estimates and you're about thirty times physical year
Speaker 2: twenty twenty five. So that's kind of where your multiples
Speaker 2: are right now based on earnings. You mentioned that the
Speaker 2: current multiple has moved up dramatically from where it was. Again,
Speaker 2: the stock is up forty five to fifty percent for
Speaker 2: the year, and again we're expecting growth to kind of
Speaker 2: slow down a little bit, right and going into twenty
Speaker 2: five at least top line growth. So, you know, Molly
Speaker 2: and Tim, the stock is definitely a little stretched here
Speaker 2: in terms of, you know, the recent run that it's had,
Speaker 2: and obviously the stock is, you know, trading a bit
Speaker 2: of a premium to what the expectations are going forward
Speaker 2: terms of earnings growth and the remainder of twenty four
Speaker 2: and twenty five.
Speaker 1: I own Githa ragnathin earlier today, Dan telling us that
Speaker 1: it's been a while since we've seen a price increase
Speaker 1: here in the US. I would imagine investors want to
Speaker 1: see prices go up, customers might not want to how
Speaker 1: much pricing power does Netflix have just in the last
Speaker 1: forty seconds we have with you, because there is this
Speaker 1: balance between making sure to raise prices not so much
Speaker 1: that people quit.
Speaker 2: You're right, Tim, you know we mentioned the ad tier
Speaker 2: six ninety nine, standard fifteen ninety nine. They drop the basic.
Speaker 2: But you know what's kind of interesting Tim and Molly
Speaker 2: is if you look at where Netflix stands right now
Speaker 2: in terms of pricing versus their competitors like you know,
Speaker 2: Disney plus Paramot all these other major you know streamers,
Speaker 2: they're right in that pack. And you might make a
Speaker 2: case to And that people are willing to pay a
Speaker 2: premium for Netflix because of the content