"Don't Jump in Front of This Train:" Ken Mahoney's Cautious Take on NFLX Earnings

Nicole (0:00)

Ken Mahoney, President and CEO of Mahoney Asset Management, joins me now. So we're taking a look here at Netflix. Some of your thoughts on this name. Obviously, there are some tests.

There is some big competition. You actually have a bull case, a bear case. So let's go through this a bit. What do you think people are saying about today's report?

Ken Mahoney (0:24)

If you jump in front of this trade today, it's like playing Russian roulette. Probably not a good idea, Nicole. It's like Russian roulette. The implied volatility is 9%. That's quite high. That means at the end of earnings, it could be in the low 60s or the high 70s. Quite a bit of movement there for implied volatility. We have to remember, last four quarters, this stock after reporting earnings is lower, anywhere from 2% to 10%.

They got to give us some confidence to why we want to be in Netflix, considering all those. Then year to date, S&P was up 13%, 14%. They're down 25%.

It's hard to make a strong case of a bull case, though. We can talk a little bit about some things that can go right for them. But for tonight, jumping in front of this trade doesn't make a lot of sense.

Nicole (1:08)

No, I understand what you're saying. Look, it's already been beaten down. It's down about 25% over this year to date, in 2020-2026, and over one year down 42%. But I'll stay on the bull case for just a moment, because you didn't talk about the international footprint, and that's something that I was hearing a lot about this morning. I also, just some color. It's the kind of thing I never heard anybody say to me, I canceled my Netflix.

First of all, I don't have Netflix. I still use linear television. I'm like one of the old dinosaurs. I like that. But everybody in my family has everything that I ever need in case I need it. But I haven't heard anybody come to me and ever say, I canceled my Netflix. They just don't.

Ken Mahoney (1:52)

It is rather sticky. Look, their first movers, some of it's inertia just too lazy to get a phone to call. Look, they have a lot of competition. Look at YouTube now.

You have HBO Max, Paramount and so forth. They tend to run around a lot like, okay, I got the few movies I'm going to see. I went through the series I want to see. I binged on that. Let me switch to another one. But they pulled on pretty good. The hardest part, Nicole, to piece this together is they don't give us subscription numbers anymore. Last time they did was the end of 2024, where they had over 301 million subscribers paying members, I should say, worldwide. And so their opportunities try to, as that first mover, try to count. But then again, we don't have that number and we don't have the CAC. That's the cost of acquisition cost, right? We don't have that either. So we have to kind of, you know, we forgot where Netflix is going. Those are two big pieces of the puzzle that I would like to know, that maybe subscription growth reignites with some of the things they have. Below is a new hit.

I don't know the whole story line, some about a fisherman and water and whatever. But look, Thanksgiving Eve, they're going to have NFL on. That's the first time. So WWE is live entertainment. So maybe Netflix is going to try to cross over from traditional movies and series and maybe again to more live TV. Maybe that's one thing to increase subscriber growth, even though we don't get to see those numbers.

Nicole (3:12)

Yeah, I think you make a great point about the numbers and us lacking that same visibility we used to have at the same point.

You know that they have certain things, gunpowder or whatever you want to call it. I mean, they just need to release another squid game and they'll be back on track. I mean, Ben Affleck's Animals has been a winner around the world at this point, even though it didn't get great reviews. I saw that last weekend. It's something that people go to still at this point, remarkably bright creatures I saw last weekend. I'm not really even one to watch TV, so I saw some of these, but what I will say is that I see that revenue is up year over year, more than 10 percent, up about 12 percent. So the question is, and they've been cutting jobs to keep costs down, but they're doing some leadership changes, and I do wonder how that may or may not help as well. Then I'll get to the real bear case too.