Firms. Its not really an earnings beat its a subscriber beat thats what investors and analysts that have covered it correctly have been focused on because the more they add net subs around the world and the u. S. , the more the future profits can grow and nobody is really worried about profitability right now. They havent been for a long time thats been the incorrect lens to view this company the correct lens has been sub growth and the ability to raise prices they have pulled off both. Keep in mind, they have added over 8 million subs worldwide and did it at the same time they raised prass in the u. S. Thats a business thats on fire i dont think its anymore complicated. Forget the spend. Forget the debt. They have to do the spend the subs are growing because of the spend. I want to make that point. Its a good point to make you pointed out the only two negative things that you can say about this ill agree with you. But if i said that about so many other companies, youd say forget this company. The evidence is in front of us that it is, as josh said, the subscriber counts that matter. And as josh said, its just truth. They are spending to get more content and drive more subscribers, which will drive profitability in the future. Over the next couple years, maybe they take on a couple billion dollars more in debt thats a drop in the bucket. Theres nothing stopping this. Its a secular grow er its first to market they have the sub growth so they can spend on the content then they get the sub growth so they can spend even more on the content. That was kind of the question in my mind. How much do they have to spend and what was that going to do to margins. Interestingly enough, margins are now actually inflecting higher and expanding ob top of Revenue Growth and all this content and subscriber growth. This is all kind of coming together i dont own it i have amazon. Thats my kind of big picture name its hard to own many of these kind of secular really expense you have names in. My poert folio i want to make one point that is really important. Its interesting to look at the counterfactual what would have happened if net flick ten years ago in 2007 prioritized profitability instead of sub growth. What that would look like is n pando pandora. A company with no growth and decent margins for what people are paying and what advertising revenue can jgenerate and then whats that worth in this environment, if youre a media play, you have to, a, own the consumer, which netflix does and two, be able to demonstrate to wall street that youre growing. Thats the key. So if you spend, you have to prove that you have the total Addressable Market and you have the growth does anyone want to own a nongrowth media profit then you have a problem thats what happened with twitter right off the bat. They were spending a whole bunch but didnt have the end Market Growth people expected them to so thats why the stock has faltered opposite is facebook while they stumbled out of the gate, they figured out how to do that nice blend. So has netflix one e question. You know a lot about charts. I did look at a chart and somebody analyzed it and said this stock above 250 is at the top of its channel and you might want to think about fading it above 250. Whats the chart tell you . Youre right. Its very tough. This is one of those things we talk about the thing with pair bollic moves is they can resolve one of two ways they can come back down and make everyone that paid not a crash just comes back down in the middle of the channel. The stock is the best performing fang over the last year its up 82 . It beat a. M. Son up 6 over the last five years, its the best fang. The stock is up 1700 . The second best is facebook up 500. This might be one of the best stocks targets are going to 300 and beyond pivotal goes 300 and others are awfully close. They are all playing catch up its that good of a stock. Its too good. They. Went to 110. E let me make this point. The other thing that can happen, there are examples of this, is not a return back to earth but a consolidation period you can have a stock like this gap higher and then the sellers want it to come in and it sits around the mid200s for awhile before the next leg i u can show you 20 examples of that so the idea that something looks like the pyre state building and is has to fulfill a prophesy, thats just not reality. It doesnt have to play out that way. Its a whole new ball game. Thats how scott describes netflixs results and joins us now by phone what was the most impressive thing to you and why do you describe it that way i think the team is is pretty well nailed it what i would highlight are a few items, which would be if you look at the Second Derivative in terms of sub additions, so the net adds that are occurring on the model on an annual basis, they are accelerating. They added 24 million subs versus 19 million in 16 thats significant because its showing an s curve inflection in the International Business by 2021, net flick is going to be address 500 million households in the markets it served we estimate they are going to have 200 million users by that point in time going at 250 by 2024 what that buys them or affords them as a company is we all know we probably paid twice as much for the product today. We have built in midto high single digit really almost through the end of time in terms of Pricing Power that can be built into this model. So you have price iing power tht flows all the way through to the bottom line. And then you have the ability on a global basis to am myrrhtize your content for the First Time Ever for a company thats built a global tv platform to lead to leverage we have operating margins going from roughly 10 this year into the mid20s by 2021 and approaching the midmid30s by 2024 nothing really matters it seems. I asked this to the gang in front of me. Forget the spend, forget the debt, its all about the subs. But the subs better keep performing of this magnitude if the stock is going to climb to the levels you think it can get to, 283 is your target or the 300s is some of your firms have on the name. I think thats right. Thats why its important to try to understand what the true Addressable Market is is of this company. We have done some detailed work in terms of households that have the capacity to stream at whats required to actually stream netflix in the household that number currently is 450 million households 500 million within the next three years and an additional 10 million by 2024. If you think about the subscriber base, you can think about it on a baseline against that Addressable Market. But also keep in mind that there are cases also where households may have one subscription. Thats not necessarily the top. And even if you use that 500 million number by 2021, youre 40 penetrated against that market what a move today 10 and then some before the day is over. I appreciate your time on this before i let you go, i know you dont cover twitter anymore. But i dont want to let you off the hook in commenting on this departure. As well as you know the company, as well as you know of his role within twitter, whats your reaction to the news today youre correct. Im still involved in the research i think its a pretty painful loss for the Company Anthony was integral to the strategy of the business and getting the business back on track and beginning to start to grow the advertising business again. So to lose that talent at the top of the company is going to be difficult to fill what do you think it says in the broader sense about from an operating stand point how twit er is is able to do that Going Forward, whoever assumes this role, a guy responsible for a lot of their live content. A guy who was responsible for orchestrating their fiscal discipline as its been described to me this morning by people close to that company im sure theres some names that are being considered already. And have been thrown around publicly as well its going to be some tough shoes to fill. But i think the company will get through it its a big loss for them does it have any baring on whether twitter remains an independent company or not i dont have a strong view on that i know you moved on to other things when it comes to twitter. I appreciate your time thank you so much lets turn to twitter and this news today. I said last week the action was concerning you had the market clearly higher and twitter was not responding so there was some advanced knowledge of this probably i think the fact that anthony is leaving twitter is not a good thing. The question what it means for a potential sael the sale occurs faster than we thought. Does that mean its no longer a salable entity thats the ultimate question what i will say is is the large driving force behind the momentum higher from the low 20s up to 25, they have now left twitter. You will see that in the volume, which significantly increased over the last couple months. The interesting thing, youre the shareholder at the table what twitter delivers in its next Earnings Report and the upcoming Earnings Report you said you were worried about what this means for those numbers. Worried in context because the expectations arent really high but heres a company that really the narrative shifted from whats the point, write it off, its going away, to wait a minute, there was a little bit of sub growth and maybe theres some hope for the ad product now in the midst of that turnover because we had had one decent quarter, i dont think its a good sign someone who was said to be kind of leading this internal turn ya around is walking away before they report. So if you were in it and excited about anything they might have to say about q 4, maybe this makes you say, here we go again. Another false start. Unless you think because of the positive comments that anthony made on the last Earnings Call that they are going to hit that profitability number as he goes out the door why would he lead expectations to think that they would it doesnt seem from the people ive been talking to that hes the kind of person o to Say Something without posting that number hopefully thats the correct way to look at it. Its incredibly important that twitter comes forth and has the type of earnings that youre suggesting so again, the momentum comes back into this 80 of the daily transactional volume, we talk about this all the time a lot of these stocks that youre talking about here in the opening this show, twitter and netflix is all about momentum. And you go back for one second with netflix nothing has changed fundamentally with netflix can they spend and still have Pricing Power, ababsolutely. So netflix, you had two occurrences, october of 2016 and july of 2017 where you saw a similar price gap to what youre seeing this morning. What happened . Five to seven days later after the price target, the stock peaks out. The next 45 days, it closes the gap, fundamentals and it goes back higher. These are momentum stories but youre saying is 80 of the volume im saying fundamentally, nothing has changed. Its a secular growth story, but you need the models participating on the transitional side. Gross managers continue to buy the secular growth stories if the numbers are going higher, thats a good recipe for an expensive secular growth stock the 20 thats not the algorithms are longterm money that is in the long run what will push this stock higher to your point, if they get a Second Quarter here where they show some profits and they show some sub growth, as we have just seen with netflix, and a trajectory towards more Profit Growth, this thing can continue higher on the back of longterm investors who are distinctly in the minority but over quarters and years are absolutely in the majority i dont think you can do that for twitter. Twitter has a lot to prove. They have to string along a lot of quarters for Institutional Investors to buy stock theres a history of people leaving twitter that didnt play out in terms of whats gone on with the share price in both directions adam bain is probably one of the best people that worked there. People were heartbroken when he left he had had done a great job. He was gone and people said, thats the guy i was betting on to turn the revenue products higher you had early founders like ev walking away so you have always had this litany of people that within twitter and outside of twitter, they said, its not going to work without that guy. So maybe thats the case with thi. You have never had to make as big of a bet on jack alone as youre going to have to make today because theres always been the bane, the noto and this is a statement really that jack is going to be there noto wanted to be a ceo. He wasnt going to be ceo there, so he left what impact does that have on square because i have been a big believer in square i traded it from the long side and now i have to ask myself, is jack going to be spending more time on the other side versus where hes been. Incredibly benefit beneficial to the stock. Hes had an incredible ability to spend time equally. More so than many other, if any other, ceos would be able to do. It helped that noto was there and that gave Investors Company for his ability to operate and based on his resume. Hes a human being and youre identifying a circumstance now where we all agree he has to spend more time, hes more on his own than ever at twitter that has to mean that hes going to spend less time at square even if it does the Business Model at square is very strong the end Market Growth is very strong lets not get ourselves out there. I dont own it. If i had to compare the end markets and growth parameters for twitter versus square, square wins hands down every time theres an opening in Silicon Valley in a company like this, theres a lot of hand rings, but theres a parade of candidates who come in and somebody will appear this is not saying either that twitter is in trouble or square will be in trouble because jack is going to have to spend more time there there will be somebody who comes in they are in trouble wait, wait, wait e he doesnt cover today he doesnt know anything about it he covered it up until a week ago. Can we agree its a show me quarter coming up. Everything is a show me quarter. This is an important quarter. No one is going to trust one good Earnings Report from a company thats had this many stops and starts every quarter. Now if they have another stop, you say, here we go. Its in the teens if they blow q 4, its in the teens. I dont care what they say if you want to make the playoffs, you have to win four games in a row theres widely held names on the move lets go through some of these names. J and j, travelers, verizon, you can take your pick on the ones you want to talk about i said yesterday that j and j was important with health care i like that name thats the clear winner in the space right now. They are seeing 15 to 20 growth i like that. The quality was poor. And at 19 times forward estimates, you needed a raise and a good quality quarter so theres a lot of other health care names aller again is a new name for me i added a week ago the e evaluation and the risk reward here are low enough that it makes sense the only other one is Proctor Gamble is a mixed quarter. The one thing thats interesting is beauty was in the upper single digit growth. That bodes well forest ta lauder every time i sell that, it keeps going higher and higher. The trends are definitely there for beauty thats reenforced my im going to stay at a smaller position. I want to touch on something you said you caught me be surprise with all allergen we wondered about the Balance Sheet. Its come down cheap enough that youre in. It certainly has come gown down. You caught my eye because its on my watch list too and we may see what happens there as far as other things im watching today, verizon. As i mentioned yesterday, its the dog of the dow generally, that bodes well theres no necessarily causality there. Its interesting how they are going to play against at t i think they are going to be distracted as the rest of the year goes on with the time warner litigation. We have an interview coming up soon we have an exclusive coming up i want to jump down to the Stock Exchange we have a look at travelers, which is one of the companies that i mentioned at an alltime high today. This is quite a move for this insurance company. Its up almost 4 . The reason is much better than expected earnings. Those numbers trounced expectations despite what was another heavy quarter for disaster losses. 499 million pretax for disaster losses that was better than an earlier guide by the Company Combined ratio, premiums increased 6 we saw a rate increase across travelers portfolio. All of that, very positive for this company thats why youre seeing shares up 4. 5 . Thats right. Do you have a thought . Lower cat losses was a huge relief big surprise. The stock has lagged most recently so has aig people have been very nervous about whats going on. To get this behind them is good. Stock only trades 1. 5 times. Its very attractive we have gone through some of the big earnings movers. What about the market themselves they did set record highs earlier today. You have some targets being raised across the street on their s p numbers. B of a puts their target at 3,000. They have joined some others in that number. Their old target was 2800. The title of the note is a bull market they are going to continue to do that thats the expectation as the market moves higher, you take your price target and move it higher. I think were complicating something thats rather simple coming into january, many people, myself include, were talking about 2016 style sell off you had had in january of that year. You havent had it the fact you havent had had it really suggests youre probably going to have something similar to 2017, where you dont do anything other than climb the staircase higher the other thing were forgets about, what about growth they were talking about that three weeks ago. Lets also put into the proper framework here that the emerging markets are still doing uncredibly well. The lower dollar bodes well, Global Growth is still pres