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Netflix beats on Q3 earnings estimates

Yahoo Finance's Ines Ferre breaks key takeaways from Netflix's earnings report.

Video Transcript

SEANA SMITH: Well, let me jump in here. Sorry, we have some Netflix earnings out. It looks like they're crossing the wires right now. Ines, what do you have?

INES FERRE: Yeah, Seana, earnings per share for Netflix beat expectations with that coming in at $3.19. Its revenue met what the Street was expecting, revenue coming in at $7.48 billion. Its streaming net subscribers, better growth than expected. That was certainly a beat, adding 4.38 million subscribers in the third quarter. The Street was expecting an addition of 3.7 million. And for the fourth quarter, seeing its subscriber growing by 8.5 million. That beat what the Street is expecting as well. So, beat across all metrics, really.

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ADAM SHAPIRO: OK, Ines, let's take this back to our panel and talk about where we're headed with the streaming wars. David, one way to look at this is we're all becoming even worse couch potatoes perhaps than we were before the pandemic. People were trying to write off Netflix because they would have to spend so much money to compete against Disney Plus and the other streamers. And yet, "Squid Game," which I've not seen-- it's a little too violent for me, but "Squid Game's" cheap, and it's a blockbuster. It seems to me they're going to maintain their lead.

- Yeah, this is a name I missed. I've been completely wrong on this name. I've avoided it for some time. And I've actually moved downstream and, really, one of my larger holdings is Viacom, obviously a legacy company. But even there, I think Paramount's-- I think the Paramount film library is probably one of the best on the planet. So I think for Viacom, you're getting something at less than 10 times earnings, a legacy asset probably fairly valued. But you're getting a call option for free on the streaming assets. Netflix proves that streaming content is extremely valuable. I'll have to try to find an entry point for it.

SEANA SMITH: Rob, how are you looking at these results, just in terms of what this tells us about the health of the consumer and the willingness for people to spend right now?

ROB HAWORTH: Well, yeah, I think there's ample savings on the sidelines. And the interesting thing to us is, as we look into that horizon post-pandemic, I think one of the questions in our mind is, did the pandemic change consumer tastes? And results like this indicate that, yes, we need to think about these secular growth stories a lot harder as we look at the longer term, that there is persistent demand here and a change in taste that may have a lasting impact, as we think about the longer term and exposure. So we'd start looking in the long-term-- for the long-term at these sorts of secular growth names.

ADAM SHAPIRO: Rob, when we talk about inflation, I realize Netflix, it's probably one of the last things people would cut from the budget because they're at home-- they're going to want that. But as prices go up, you've pointed out how the Fed reacts to inflation could really upset the apple cart. What are you most worried about, that the Fed may overdo it or undo it?

ROB HAWORTH: Yeah, it doesn't really look like-- it looks like the Fed is on the right path at this point with a planned tapering announcement, it appears, in November, maybe implementation in November, and rate increases late 2022, maybe early 2023, if all is warranted. I think if the Fed gets extra hawkish, that would be a challenge to an economy that probably can't handle interest rates getting too high, even as we watch rates struggle to get back to the highs they saw earlier this year.

And even if they're too dovish, right, that's still a pretty constructive story, as long as wage growth is happening, and we're not reducing jobs. So, it's something we're watching. It's something we're paying attention to. But it's not clear yet that they're on the steps of any sort of policy mistake just yet.

SEANA SMITH: And David, as we wrap this up, I guess if you were to identify two or three attractive opportunities right now, where are you putting money to work?

- Well, certainly in the financial sector. And I think what we've seen in the earnings season this time around is encouraging. And I think the yield curve is going to continue to steepen. And we're going to see net interest margins improve, and they have improved. And it's showing up in almost every earnings statement.

I think, to my earlier comment, you're going to have to move to companies that do have pricing power. So health care is going to be a strong area. Technology is almost always strong, but even more so now because you're going to need companies with pricing power. So I think you're going to have to look at your portfolio, [INAUDIBLE] what isn't working. I think things like consumer staples and even some consumer discretionary are going to be challenged.