Stock . Steve grasso i dont think so. Bespoke, paul hickey was on. He said a great thing about seasonality, the Second Quarter is a bit tough it gets better going into yearend i think if you are a netflix bull, this really hits you in the gut, but longer term i think you can stay long. Thats looking at the glass half full, isnt it . 2. 7 i mean 2. 7 million. It is a terrible number. Versus 5 million, the first drop in u. S. Paid subscribers ever. Thats the key. You could you could argue, you could argue that, okay, fine, wall street got ahead of itself and was expecting 5 million, they came in at 2. 7 million international, but it is the loss in the u. S. When you are facing competition and you have raised prices, that really calls the whole story into question. I dont think it is international. What i was upset with was in april theyre the ones that came out and gave us the 5 million number. Right. It should have come from their guidance, was completely wrong in april how do they not have a gut feel on that number to dress the window down even more . I think it is about International Growth it is not about domestic for me. It is about international. Well, but the domestic matters because you have competition coming in domestic and they raised prices here, right . Thats what investors are concerned about. And the u. S. Market is slowing on a relative basis in growth. It is obviously a fantastic company, great story but when you have metrics that are so sky high like this and you have a miss like this, it is not like, oh, all of a sudden it is cheap, right . Right. It is still in the stratosphere for me. You know, you always wonder and for years ive been wondering, all right, when does it finally catch up to them. Right. When does all of the spending and the growth catch up to them, that they dont actually make enough money to warrant this kind of valuation. I dont know if this is the time i certainly wouldnt short it here, but i would let it i would let it settle for a while. I just want to bring up one point jim cramer made that i think is so important. He said you really shouldnt trade anything before you hear the Conference Call. Theres so much color to be had on this. We will see what they we will see what they say, but to jump in right here with half the information, i dont know, you got to be i would love to see if they have a good as long as for that big of a shortfall at this point. Well, what he is saying, all right, in april they said that theyre i think talking about a decent quarter this current quarter. Right. Do they have more credibility now than in april . Or less. I dont know. And context was weak in the Second Quarter in q3 you got Stranger Things season three, 41 Million Viewers in first five days you have orange is the new black, money heist, a lot of good stuff happening in the back half of the year hopefully they can rebound, but theres no way to sugar coat this it was a complete disaster, a complete wlif. Right. How bad is friends, losing that. Does anyone have netflix . I do not. I did not subscribe to netflix. Do you watch a lot of friends on netflix or the office . No. My kids do. It is another generation. Im sure theyre watching other things as well when you look at the numbers, it is above 50, close to 60 looking for their own content, not friends. Right. My biggest concern as an investor would be the fact they put through the price increases. We saw the big drop in total users. The question with all of the competition coming forward in the back half of the year and going into next year, will we see netflixs ability to raise price Going Forward curtailed . To me thats the most shocking thing, right . To be fair, earlier this week i had said i was bullish on netflix and said, listen, youre not going to cut it. Netflix is one of the last things you cut off in a recession or in a downturn in the economy. It turns out i was wrong so for me ive got to question the whole thing, and their entire Business Model has been spend a ton of money to get those subscribers. If you dont have that growth, wall street is not going to give you a break on spending money. Or if you cant raise price. Right. On a slowing growth user base like the u. S. , then what yes, thats a problem if you cant raise price, you have big issues, especially with what theyre spending on content right now. Right. I mean the Free Cash Flow burn is still an issue fortunately, they reaffirmed it will be just negative 3. 5 billion and it didnt get worse because last quarter it was 3 billion, then tipped up to 3. 5 billion. I was a little concerned it might tick up even higher. They did reaffirm it is going to stay where it is at. But, yes, it is an issue if they cant increase the price. We have seen it before, seen them increase price, saw the stock tumble, we saw the seasonality of the Second Quarter being weak. Have we seen a decline in u. S. Paid subscribers . No. We have never seen that big a whiff on the numbers but i believe what karen said, listen to the call and see the message. But the outstanding question to karens point of the valuation is, you know, it is a growth stock it is certainly priced for growth if were not seeing that in u. S. Subscribers at this point, then what yes, valuation though has been astronomical, and thats a problem. But i should say that has never been a problem before. So it depends on what degree you start to see the problem. Thats exactly the problem with the high flyers it dont just happen to netflix, but as soon as the growth slows and thats what theyre getting credit for we have seen it with many other companies. As soon as that slow the story deteriorates and different buyers are to come in and it is not cheap, to karens point. What metrics are you going to use . It is a slowing Growth Company based on this quarter, based on not hearing the call. So they are talking about a little bit of potential pull forward. First quarter they added 9. 6 million subscribers which was a blockbuster quarter. 2. 7 million this last quarter, so maybe there was a bit of pull forward and maybe this quarter isnt as bad as the headline number leads you to believe. I dont know. Theyre the ones as grasso said, theyre the ones that came out with the guidance. Right. Should have said, there was pull forward on the first quarter, Second Quarter will be down three, and it is a miss but not as big you have to wonder what happened. What happened what happened in april and end of the quarter. It could be the most interesting call in netflix history. Right now, today, this could be the most interesting call. The flip side, disney, i would have bet against that one. That one is still up 30 yeartodate. That the stock would have fallen by now . Come back to earth. But it stands the reason when you look at the complex, it stands to the positioning of it. You look at ebay, you look at netflix and the crowded names that are dropping the most. You dont think netflix is crowded . Yes, it is crowded. People underweight in ibm had to chase it, people underweight in disney had to chase it because they were waiting for it to break out on the range and it is holding. Lets bring in fast money friend gene munster for more reaction what do you make of this big miss how would you explain 2. 7 million versus 5 expected . They probably pulled 1. 4 million from the december quarter but it capture the significance of the miss. They should have accounted for it in their miss, they should have said four instead of five. I have listened to your commentary i dont like to pile on when things are negative, but i want to try to have a most clear view of what is going on and what has happened even if you account for a pull forward they didnt give proper guidance for, this is negative this i think we will look back at this quarter as one of the pivotal moments in the netflix story. I think what the key insight here is that the content lineup that they had in the june quarter just simply didnt get the job done we can talk about whats coming in terms of competition, but ultimately that is the tip of the spear at this story. When you put a layer on top of that content and things are going to get more difficult. When you layer on top of that, the valuation and i want to enumerate that, 52 times next years earnings and it is on the lower stock price, compare it to apple at 15 skrjust as a point f reference, and then you add the debt piece which we have not talked about, i think it is between 10 and 12 billion in debt i think you can see why this quarter is not necessarily the breakdown for the future, but we will look back at this quarter as the best days of netflix are behind it. Thats what you believe, weve seen the best days of netflix, theyre over . I think we have they may have an anomaly quarter, but when you put the factors together in terms of the pricing you have talked about, in terms of the debt, the valuation, upcoming competition, what their content roadmap looks like, yeah, i just as much as i love the company, i just think it is going to be it is the best days unfortunately are in fact behind it. How concerned are you that netflixs ability to raise price is severely curtailed at this point given the competition on the horizon . It is definitely curtailed. The competition, like you said, it is not about the pricing piece, it is not about what happened as much in the june quarter about as much as what is coming u we are talking about four major new competitors coming in the next year, and so i think it will impact pricing. Of course, we know the model we have talked about it here today, is that you have to keep the subs going to keep funding the content to paying off the debt it is wonderful when it is working, but if it starts to backtrack my one question going into the interview tonight, i think thats how they referred to it, is that guidance is theyre sending a message theyre going to step right back up to normalcy i understandthey have a good start for the month of july, but even if they are able to step back up to that, call it 6. 5 to 7 million range, which is consistent with the average number of subs theyve added over the last four years, 6 1 2, even if theyre able to step up to it, i dont think it will be sustainable. Gene, when you look back i agree with you, it is a terrible number when you look back on it, how much did game of thrones have to do with this . And with the stock down now 12 , at what point is it a buy even if the best days are behind it at what point does it collapse enough for you to buy it dont have good answer on game of thrones. It had an impact, but they knew that that was coming in terms of where would i buy it probably around that 15 multiple, so a ways down from where were at. All right gene, grade the quarter, please. Oh. Im going to give it a cminus. Oh. I struggled and i wanted to give it thought about dplus, because if you missed back in elementary school, if you come up with 46 short of perfect, that to me is a d. But they did grow subs so i wanted to give them some credit for that so to answer your question, melissa, cminus. All right, gene let us know what you think of the interview, as they call it gene munster of luke spencer lets dive into the charts on netflix. Mark newton is at the plasma what does the chart look like right now . Down 12. 5 . Yes lets look at the technicals to put it in perspective. Almost 45 from the Closing Price today, a big drop, obviously 2. 7 versus 5 expected. When you look at the longer term chart it is interesting because the stock really had gone nowhere over the last six months so obviously lagging other faang stock like facebook and amazon todays move will put it under the entire range going back to the beginning of the year it it will open potentially tomorrow morning under 320, which on a weekly close with two days left likely will send it down even further in the days to come. When you look at the longer term picture, this is interesting because the stock has really beginning what i view as a longer term consolidation triangle so getting down here 275 is really the area i would Pay Attention and look to buy on dips if it is under 322 by friday, my thinking is that it is going to show further losses to come. Obviously it is going to be big volume most likely tomorrow, undercutting all of these former weekly and monthly lows. Thats certainly a negative technically and that joins what were thinking on the fundamental side whether it is anomaly or not you have to Pay Attention when you see a big gap down on heavy volume ibm on the other hand up 1 . It had a big move after hours here take a look at how this looks after hours, and the stock up 33 . Everybody looks at the short term longer term though, it is really important to notice this stock has been really in a longer term down trend since 2015. Right up there zoo is an area i would want to sell into this and short it, if not selling rallies on what i own. I dont really like the structure here if anything, this is still one to consider selling into strength very much a longer term laggard. Ibm though in the near term, you know, it really has to get up above the former highs which would help it get up to 150. Above 150, then you might take a look but, you know, bottom line is netflix is one i would be wanting to buy in the weeks ahead, getting down under 280, down to the 270 level. Ibm on the other hand is one i would want to look to sell into on further strength in the weeks ahead. Mark, thank you mark newton at the plasma. Lets do would you rather. Buy ibm on weakness or sell into strength thats a fantastic, a really hard one you know what, i would rather sell ibm into strive i will tell you why. One, i think ibms quarter was good nothing wrong with that quarter but they havent had a lot of big expectations for ibm red hat was probably better than what they were expecting so it was kind of a showme story. They showed you. I think you have a better chance i would rather sell that than netflix, the story is broken here, and as mark was saying these things are great on the way up, right . It is a nice, virtuous circle on the way up, but when that reverpss it r reverses it is a big problem. Same question to you, mark. I would buy the dip on netflix. They are subscriber misses, Second Quarter of 18 buy the dips has worked for netflix. I think the longterm thesis is intact. Even with the competition coming i do. Streaming is not a winnertakeall space. Theres room for several companies to succeed and they have first advantage who else has 250 million subscribers. Karen in. Im in bks short i would rather short ibm the risk of being short, it absolutely becomes a darling ala netflix. We have seen darlings that are no longer a darling and how painful it could be. It makes me absolutely ibm shorter. Coming up, much more on netflix throughout the show as the streaming giant gears up for Conference Call or interview in less than an hour. Plus, testifying on capitol hill calling Facebooks Libra dangerous. She will be here to explain how big a threat it is to the crypto universe live in town square here in new york city, much more fast money right after this. Welcome back to fast money weve got an earnings alert on United Rentals, dropping in the after hour sessions. To kate rogers at headquarters. You said it United Rentals taking a dive in after hours trade. They beat on the top and bottom lines for q2 but trimmed the outlook from the high end of full Year Revenue Guidance ceo said the company was pleased with general rental and specialty segments for the quarter and added that the outlook for the second half of 2019 remains positive for both in the field he added the guidance changes respect a thrower than expected pace for blueline integration. The buyout is supposed to help boost the companys presence in north america as well as what he called historically bad weather in key regions in the quarter. The Conference Call kicks off at 11 00 a. M. Eastern, and key things will be commentary on customer sent men along with the seasonal headwinds like the one he mentioned, and more commentary on the blueline integration and what may have held it up it is up around 20 year to day and trading down 24 from highs hit on september 20th and had a rough 2018 and isamong the top ten worst performers in the industrials over the past 12 months. Melissa, back over to you. Kate, thanks. Kate rogers at headquarters. Lets trade this, karen . Yes sadly, painfully i am long uri. I love this company, think the Management Team is fantastic i dont love citing weather. I think bad weather is not a one off, but it is the way it will be the thing that stuck out to me a little bit and it is not a huge deal, but the thing i didnt like, they talked about it being slightly less than they had given before in their outlook, but their Free Cash Flow actually will be a little bit higher while it sounds great, the reason is because theyre going to pull back a tiny bit on their cap ex i like when theyre feeling good about spending, and so when they see the returns on that cap ex so it is not a huge amount of money. On the Balance Sheet theyre getting toward the lower end of the leverage they feel comfortable having i would rather see them be a little more aggressive it is not expensive here post market, it is not expensive at all, but as a bellwether for how companies are feeling about the economy and the future of spending money. Sure. I dont love it. It is the signaling factor, right . We had housing stocks today which were not that great, right . Now you have a company in the industry saying, you know what we dont feel as great about the industry as we did maybe six months ago it is that signaling effect. Now, down at 110, this stock traded between 110 and 140 roughly. I think down at 110 it is probably a good risk reward. 122 now. 122 so another ten bucks, thats where bk likes it. And technical is up, so karen gave you a great fundamental backdrop, but it is triple topee from february, april and now recently right around where it fell from has been resistance to the name it does not look like it is about to break out any time soon. But more broadly in terms of the mosaic we have seen so far from industrials, we have gotten the initial one basf, we got a warning from fastenall which cited tariffs and higher raw materials. We have this we have csx which was a horrible loser in todays session. Absolutely. What does that mosaic pain