Instant Reaction: Netflix Disappoints Again with Slow Growth

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**Carol Massar** (0:19)
We are focused on Netflix. We're going to bring up the trade for you because we did see the stock bouncing around in the after hours. I remind you that it's down more than 20 percent year to date, down more than 30 percent since hitting a recent high back on April 16th. That's when it reported earnings last time and there was disappointment about revenues and call it so two quarters in a row.
Quick check on some of the numbers in terms of Netflix. We did see that as we mentioned, second consecutive quarter of slowing sales. The company projected revenue of 12.9 billion and earnings of 82 cents a share. So again, a second consecutive quarter of slowing sales growth. So investors have got to be having some questions about, where does growth come from and what's the future for Netflix? Although, let's point out, still the giant when it comes to streaming.

**Tim Stenovec** (1:07)
It is still the giant. I want to bring in a great roundtable to kick off our coverage. We got Felix Gillette with us, Bloomberg News Media and Entertainment Editor. He's here in the Bloomberg Interactive Brokers Studio. Also joining us, Eric Clark, the CIO of Accuvest Global Advisors. He focuses on consumer stocks, including Netflix. He also manages the Alpha Brands Consumption Leaders ETF. Eric, I want to start with you because in the Alpha Brands Consumption Leaders ETF, ticker LOGO, the fifth biggest holding after NVIDIA Broadcom, Eli Lilly, and TSMC is Netflix.
After a report like this, are you buying, are you selling, are you holding? What are you doing?

**Eric Clark** (1:43)
Hey, Tim. Great to see you. This is a continuation of our conversation last quarter.
It's a consumer utility, and I have nothing too bad to say other than quarter to quarter, things are going to bounce around. We still believe in the story, we still believe in the growth opportunities. It's summertime, so viewership might be a little lower. We're all out having fun at the beach.
They bought back 4.7 billion a stock. There's still 27 billion left on the authorization. That's the biggest quarterly buyback in history. So I'm happy to see that they took advantage of the weakness. That's what I was hoping and expecting them to do. To me, that sends a little bit of a signal, but every quarter is a little bit noisy. I don't think anything's changed with the story. In many ways, it's a stock that was outside of the tech and the AI theme, and they've discarded everything that isn't tech and AI up until the last two weeks. So this utility now at 21 times looks pretty attractive as a stable, predictable business with big free cash flow and a big buyback.

**Carol Massar** (2:55)
When does a utility with second consecutive quarters of slowing sales growth, when does that trend become worrisome? Does it have to be three? Does it have to be four? Does it have to be more? What does it have to be?

**Eric Clark** (3:06)
Well, I think it's less about that and just more about when we get into the fall, when engagement starts to rise again, we know that they're pretty comfortable with ad revenue rising. That's high margin business, free cash flow or free cash flow generation really good, margins still creeping up. So I'm not worried about a dime here or five cent there. In the end, a utility has a very good defensive range of earnings and that's what we see with Netflix. We've just transitioned from a go-go growth stock to more a growth at a reasonable price stock into the core. So in some ways, we've changed the shareholder base over from one growth investor to a more stable core investor.

**Tim Stenovec** (3:51)
I want to bring in Felix Gillette. He's Bloomberg News Media and Entertainment Editor. He's also the author of It's Not TV, The Spectacular Rise Revolution and Future of HBO.
He joins us here on set. So Eric keeps saying utility over and over again, but when I think of utility, I think I only have one utility like the provider of my water, electricity or internet into my home. In my home, I have, oh my God. Well, now I pay for Fox One thanks to the World Cup. So that's another 30 bucks a month or whatever. But I got Netflix, I got Paramount, I got HBO Max, I got all of these things right now. And I don't know, do you agree that Netflix is a utility?