Netflix and Morgan Stanley Earnings Reaction, Fox-Dominion $787.5M Settlement 4/19/23

Jim Cramer (0:00)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

David Faber (0:08)

Good Wednesday morning.

Carl Quintanilla (0:09)

Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. Pre-market stumbling a bit, as some of the earnings not being greeted at well at companies like Morgan Stanley, Ally Financial, Synchrony, ASML. Inflation also running hot in Europe. Our own two-year yield, 428, is the highest since mid-March.

Our roadmap's gonna begin with Netflix, posting those mixed results, saying its broader password sharing crackdown is on track for the current quarter.

David Faber (0:35)

As for bank earnings, Morgan Stanley is out with its quarterly results. They did surpass what most analysts had been expecting, but the stock right now is down.

Fox News agrees to pay more than $787 million to Dominion. That is settling a defamation lawsuit that was brought by the voting systems company.

Carl Quintanilla (0:54)

We're gonna begin with Netflix this morning. A mixed financial results sub ads also coming in below estimates, co-CEO Ted Sarandos was on the call last night talking about the company's quarter.

Ted Sarandos (1:06)

On revenue and profit, we're growing, not as fast as we believe we can, not as fast as we do want to, but we are growing and we are profitable.

And we have a clear path to reaccelerate growth in both revenue and profit and we're executing on it. You'll see a broader rollout of paid sharing in Q2, and we're gonna continue to grow that ad business. And we also are aiming to continue to grow free cash flow. As we said this year, we're gonna generate about 3.5 billion in free cash and on increased margins.

Carl Quintanilla (1:34)

So we had that 10% drop before the recovery last night, Jim. I think it was the JPM desk that said, take a chill pill.

Jim Cramer (1:41)

Yeah, I actually like that. Look, I like the quarter, I'll tell you why. The progression, as he said, they'll be accelerating revenue growth.

This whole story that maybe they're not rolling out password changes fast enough, I mean, they're being very, I think they're being very prudent.

Was it like the old days when the quarter was about, did you watch this movie and how great was Night Agents? No, it wasn't like that. It was very nuts and bolts, but maybe that's what you need at this point in a senior growth company, where they talked about how good games are going and they're going great in India. They're talking about how a movie slate can still be good and they're saying, listen, we're going to do many movies and they do very well. David, there is nothing wrong with talking about how you're now investment great. There's nothing wrong with talking about how this does not make the magic go on if they're talking about how they're doing quite well.

David Faber (2:34)

No, but this is no longer your daddy's growth company, so to speak. This is now a generator of free cash flow and that's where people are going to, or I think many investors will be focused. And on that front, by the way, they came in above where many of the analysts who followed the company had anticipated.

They actually are decreasing ever so slightly their content spend. So they're staying right around $17 billion.

Jim Cramer (2:58)

But in a way that is going to fall to the bottom line very quickly, even with a little bit of revenue.

David Faber (3:02)

Right. So then it becomes a question of, all right, what are you willing to pay as a multiple to free cash flow?

Jim Cramer (3:08)

And I think that I was going to come up with a completely wacky analysis. Everybody's so gloomy and it's horny, I don't like that, okay?

What these guys need more than anything else in the world is a good theme park.

David Faber (3:20)

A good theme park.

Jim Cramer (3:22)

They have all these characters.

Carl Quintanilla (3:24)

You're going to sell a company on building a new theme park.

David Faber (3:27)

He's got theme parks.

Jim Cramer (3:30)

The theme parks are the greatest thing ever. The fact is, is you can raise, Netflix could right now announce a theme park and raise prices for the theme park next quarter. They have all these great characters. No one's thinking about it as a great characters company. They ought to do a joint venture with the company that I work for. But the joint venture with the company we work for have a whole lot of new characters. It would all be added in a licensed business. I can broker the deal. I will take absolutely nothing because I work for the company.