"fast money" begins next. >> and "fast money" starts with breaking news. scenes of chaos at the republican national convention as anti-trump delegates try to make their final stand. we're live on the ground in cleveland with our own john harwood in a few moments time. julia boorstin and bob peck are on the earnings call. also following earnings from ibm and yahoo!. josh lipton with the yahoo! call and susan lee is listening in on big blue. i'm simon hobbs in for melissa lee. our traders, tim seymour, steve grasso, dan nathan, and guy a a ada adami. we start with the nightmare earnings for netflix. the beg headline, subscriber growth or the lack of it. only 160,000 new subscribers were added in the quarter. that's against expectations of over half a million, and the

company slashing its subscriber growth guidance for the next quarter. the question now, is netflix any longer a growth stock? dan, let's start with you. >> well, here is the problem. it's international subscriptions. that was the thing that took it down last quarter when they reported in mid-april. they guided down from this quarter from 3.5 net subscribers to 2 million. they just missed that number. they came in at 1.5 for international subs in the q2 and then guided the q3 below expectations. for a stock that trades at this valuation, you need to see that ramp internationally. there's been no shortage of questions about competition. maybe that's coming into play. we know that they have that price increase here domestically for long-time subs. a lot of headwinds. >> you're talking about the price increase. reed hastings has been on after the result talking about this ungrandfather. it's basically the price benefit or the inducement you had to get and sign up for netflix is coming off and coming off for a

lot of domestic subscribers. down 70%. so these are atrocious relative to the internationals. i would point out if you think about where netflix has gone over the last two quarters in domestic, think about where we were a half year ago in the growth story even in this country. off the charts. there is competition, a lot of it, and if you watch netflix, half -- this is telling me half the people that watch it are watching for stuff they could get on hulu, on amazon, any other place. >> there are competition fears. also people are holding back because they don't know what that unraveling is going to look like with the cable companies. they don't know what the skinny bundle is going to look like or what the real competition price is going to look like. >> do most people who watch netflix analyze it at that sort of level? >> i think they look at what they watch and say is it here?

>> welcome. >> thank you so much. >> and you look handsomer than ever. >> you're too kind. >> thank you. >> but i do believe technically netflix is approaching a bounce level, just technicals. forget fundamentals. forget the headwinds. forget international growth. forget everything. you buy this stock below $80, and you probably get a bounce regardless of the fundamentals. >> we destroyed $5 billion of value if not more tonight. >> and november is one of the topped out in the 130s. i tried to find the silver linings a couple times but this is as bad a quarter as they have reported. you will be here all week. we will welcome you today and then we'll pretend like you are a staple, which you are, by the way. $79.95 was the low on february 8th. if you're looking for levels, that might provide you with one. now people will start -- people who haven't talked about valuation and dan and tim have for a while, but people who haven't now will talk about it

trading 90 times forward earnings. i think first time down i think it holds 80 bucks. >> if you're going to buy the stock at $83 if it gets back to the support level, you have to answer really what's becoming an ex s existential question, is it tivo? ross levinsohn said this is going to be the most important media company in the next ten years, but it doesn't really feel like they're going in that direction -- >> also the problem for netflix is that it's up until this point in the market it's been a search for yield. so this hasn't been the proper time for netflix. so it hasn't really performed well and it doesn't seem as though there's any silver lining going forward. so there's a couple things that are troubling. >> there are a couple things that are good. the deal with comcast could be very good. they'll start having disney content in the fourth quarter. it will come down to what they have to pay for content. this is a big deal for this company. they have made huge commitments to a lot of different stuff and obviously they're growing their own content. i think they're probably going

to find a way to go back. i could be wrong. there's probably a lot of "orange is the new black" fans who will -- >> that's the question. is that the lead that it was in the u.s.? is it working overseas? are those programming they have spent billions of dollars acquiring or creating -- >> but if reed hastings is in correct and this is in response to price increases, presumably the price increases will come through in terms of higher earnings. they should be better able to meet the costs they have. >> except for the fact the subs are the most important. i don't care that they beat today. >> to dan's point though, it's a lot harder to come up with content and when you go in other international place that is we've done here, they don't know the landscape the way they do here. >> that's true. the netflix earnings call is in full swing and bob peck is listening in. bob, what stands out for you at this moment? >> so the quarter itself was obviously disappointing and the guidance was very disappointing. what's interesting, they're making a very clear point that gross ads or new customers

coming to the platform was in line with expectations. so it really is more an uptick in churn from ungrandfather eed customers and it begs the question about the value price proposition. what we will be looking for on this call is don't forget you have new ungrandfathered changes happening in the fourth quarter so what that impact will be. what will be the impact of the olympics? what about the slope of international growth if some potential positives is they may get other cable company distribution. may have some offline viewing as well people are looking for and always m&a speculation as well. >> clients will call you if they have not called you already and they'll want advice on what to do. what will you say to people? wroo we have a neutral on the stock because we had these concerns. we didn't like going into this unprecedented time, price increases and what that churn could be. we have concerns about the quality of the content they have internationally and if it's enough to get new subscribers on the international platforms. we'll have to see how that

develops. >> is there something reed hastings can do that will assuage some of those concerns? is there a change that could be made that might head off some of the criticism? >> i think the big thing there will be able to show some of the gross ads international, the price content is resonating with subscribers. international is growing. it's just not growing as fast as some had hoped. >> you just mentioned potential m&a. reed hastings doesn't generally care what investors think. you think microsoft just paid $27 billion for linkedin. here is a company that has a market cap of about $36 billion. would that be the aol/time warner of this thing and would reed hastings ever sell? >> investors always ask this question about netflix and where would be a good spot for them? would it be apple, google, microsoft? obviously it will be a very large check because you're talking about something north of $50 billion to ultimately take it out at these level approximates. >> so you don't think it would happen. >> we don't have any insight whether m&a is imminent.

>> we have netflix tanking. yahoo! is holding steady, and ibm is up after hours. let's talk about what this means for the broader market rally. guy, let me kick off with you. of course, we have fresh record highs today. >> i don't think it means anything. i don't think netflix means the market is going to sell off. the market has a mind of its own for a while. if you want to talk about ibm specifically, i'm sure we can. in terms of the broader market, friday afternoon, coup in turkey. you could say it was short lived, whatever it was. but s&p were down ten handles. bonds were rallying, gold was rallying. we come in today s&p is up six handles a reversal of 16 or 17 handles. what's the point? there is no bad news that the market looks at and will have in any way a sell-off. it's looking past every piece of negative news. earnings matter. earnings skr been good but they haven't been great and not good enough in my opinion -- >> what does that mean when you make that very important observation, where does that take you next?

that it -- >> in terms of the s&p? >> yeah, a move higher. you have trouble in store or we're quite immune? >> i have been trying to find a reason why this market is going down for the last three or four months. >> so is everybody else and that's the problem with the market is a lot of hedge funds have not participated on the way up. they have questioned it. we always talked about these rallies being hated and these are the overshoot levels. 2169 overshoot s&p cash. where do you go from here? higher. you have to. no one is buying the stock market. we're making isolated bets. there are certain guy that is are adding to their plays or individual names, but as a whole, i don't think anyone is blanketly buying this market. you tell me if you see it any different. >> we're not reliant on f.a.n.g. stocks anymore. guy might have answered that question differently six months ago. the fact that the outperformance and the earnings surprises if anywhere are coming from the

banks. we're very early in the earnings season but as steve is pointing out, we've come into this with a very low expectation. there's a lot of cash on the sidelines, and to me i think investors are ready to give a pass on this quarter and possibly the next. they want guidance for the last part of the year. they want to hear somebody say that we actually think the world is getting a little bit better and that's enough. >> i would just add that i think you guys are correct. the most bullish thing is not the rely eiance on these ten sts that had been doing a lot of heavy lifting. we talk about this all the time. the bank stocks are up a lot off the lows. still well off the 52-week heiss. the rotation out of growth into some of the stuff like energy, materials, and banks has clearly helped put a bid under the market. i'm not certain it goes straight up from here. i've been saying that for a while now because i think you're going to have to see some fundamental improvement to really drive it. not just a beat of lowered expectations because that's really what we're seeing in some of these beaten up sectors. >> and gdx is still up 117%

year-to-date. you have xlu still right around historic highs. xlp still performing. it's not as if people are dumping yield and going into whatever they see as growth. they're playing everything. >> in fact, look at the u.s. treasury market. you're right back up right around 160 where i think you have a very clear downward trend. the proof is for the treasuries to sell up through that. i don't think they will. i think yields will go lower. >> still ahead, we're sticking with netflix. the netflix nightmare as some are calling it. is the stock itself a house of cards? we'll hear from the co-founder who says there is one thing the company could do to get back on track and he'll explain that. plus, protests breaking out at the republican national convention, and it's barely getting started. we'll take you there and get reaction from former republican representative ron paul who says this is only the start of the chaos as far as he is concerned. and later, the chip stocks are on fire as deal making in the space hits fever pitch, and

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we have an earnings alert on ibm. simon a 17th straight quarter of revenue declines for big blue but what the markets were looking for were signs of improvement in growth as ibm transitions away from hardware to cloud and analytical based future. the future is primarily based on cloud, on cognitive computing. the ceo calls the company's strategic imperatives. an impressive gain of 30% for the cloud business, but the only segment that actually outperf m outperformed and beat was cognitive computing which watson is part of. watson and the rest of these strategic comparatives is what ibm is pinning its focus on for the future which they hope will make up 40% of revenues by 2018. they may not have to wait that long since in the earnings

report card it already makes up 38% of revenues. ibm stock has outperformed this year. analysts say it's cheap compared to peers and has good def de dividend yields at 3.6%. >> let's trade. >> it's cheap. i agree. it's had a huge run since february. we talked about back last year in the fall how this was a $125 stock. it actually overshot to the downside. 17 quarters of declining revenues, and margins have been declining. so why do you buy the stock? well, you're buying it probably for the dividend, 3.5% dividend. i'm sure there's some chase in terms of that. buying it for valuation and buying it on the hope that they can get into cloud in a big way. i think -- >> artificial intelligence. that's where -- >> i'm confused because you haven't liked this stock for a long time and been accurate with that. to say it's cheap now when two years ago in 2014 when we're embarking on this change and transition for a company, it had

15% to 20% higher revenues and traded 9.5 times. >> i think it's -- ai'll put it this way, it's cheap in terms of where the broader market is trading. i think it should be trading more like nine, ten times forward earnings. you can make that argument, but i think what the market is rewarding them for is that they are cheap to the broader market. people are chasing yield, as steve said, for a while and they're trying to play catch-up in names that haven't participated. >> i think that's the only reason people have been chasing ibm is for the yield. 3.5%. but long term bounce levels, this stock hasn't even got there. when you say long term, you take a high and a low and then you come up with a 50% and a 618% retracement. that's where you sell it. that's 166 up to 178. we haven't even got there yet. i still think the stock is a sell. i don't think they can grow fast enough where they're heading and cut the fat quick enough. >> yeah. list

listen, i think there probably needs to be some sort of corporate action not too different than what happened in hewlett last year and they need to move away from legacy slower moving things -- >> spinoff? >> likely a split off and make acquisitions to accelerate growth. sales went from $107 billion about four yearsing a to expected $80 million. they're not growing. they need to probably do something pretty soon. >> as we head to the break, let's have another look at netflix tanking to the tune of 14.5% on a massive subscriber miss. that's about $6 billion of value that's been destroyed. we'll hear from ceo reed hastings in his own words and co-founder mitch lowe on the one thing that he says will right this ship. i'm simon hobbs. you're watching "fast money" on cnbc, first in business worldwide. in the meantime, here is what else is coming up on "fast." ladies and gentlemen, this man could be our next president. >> bing, bing, bong, bong, bing.

>> clink. >> ka ching, ka ching. >> bing, bing, bing. >> and former representative ron paul says it could lead to a depression. he'll be here to explain. plus, here is what chip stocks are doing. and one technician says there are even more games to come. he'll tell us which name when "fast money" returns. they may t products and services, but they demand the best shopping expiences. they're your custors. and by blending physical with digital, cognizant is helping 8 of the 10arst u.s. retailer meet theiremandsdsith more . ones that transcend channels and locations, ticipate expectas... eating new ways to engage at eve imaginable it's a new day in retail, and together we're ilding the store of the future. digital works for retail. let's talk about how digital works for your busines announ are your childrenin the t for eir age and size? it may be too late to check when you're the road.

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welcome back to "fast money." chip stocks surging after japan's softbank unexpected lie acquired arm holdings of the uk for $32 billion. which other chip names could be gearing up for a breakout. carter worth is at the smart

board. >> thanks. i'm looking at a laggard in this case and sometimes that's very dangerous and sometimes it's where you get the good eating. it's qualcomm and the visuals speak for themselves. you have the semi-conductor index in blue and qualcomm over the past year. so you see a spread here of 2300 basis points. i want to pull it back on a five-year basis where the whole thing broke down. basically whatever qualcomm i'll leave this to those who study the funny-mentals. whatever the problem was over the past two years, it looks like that's starting to change. the stock got cut in half 82 to 42. that bottoming out action is what appeals to my eyes. let's draw some lines. 82 to 42. you could just do a simple trend line. take it away, put it back. i mean, we've broken above the trend line. you can name your pattern. some people like head and shoulders, cups and handles. we could put another shoulder in here and call it that, but

either way that sets up higher to my eye. or you can just allow a moving average. that's all that a moving average is, an automated trend line, to speak for itself, which we know that in down trends things fail at or near their trend line, and once the line changes it typically will find support off that line. so, again, whether you calm it a bearish to bullish reversal, you want to call it a cup and handle or head and shoulders bottom, just a move above a down trend line, i think you want to play this for catch up in a group that's been strong and the price objective here is going to be 60 bucks. there's a gap right here and we want to play for a retracement to the gap. close at $55 and change today going for 5 bucks on the long side. >> thank you very much. guy adami -- >> doesn't he do amazing work. >> yes. >> he's the zenith. >> or the apex. one or the other. >> either one. >> head and shoulder bottom. >> funny-mentals. it does have a good balance sheet. i think another reason why the stock has rallied, not unlike

ibm because it's close to a 4% dividend and you know what? i think the market is sufficiently short enough in this name that when we report on july 20th, which is -- what's today? the 18th? you could see a rally into earnings. i'm sort of with carter braxton worth on this. >> can i hit the funny-mental. the part where the chart went down went to do wi-- had to do cell phone penetration. i think they need to make an acquisiti acquisition. if they spent a few billion and did a deal, i think investors will start to see they are thinking strategically rather than the $10 billion share buyback they announced last year. >> but the softbank deal for arm was so left field, wasn't it? is it really a lead indicator for anything here? >> well, i think it was actually catalyst driven though. the pound is a huge catalyst to

their stepping in to buy something they have been looking at for years. back to qualcomm, the china situation has gotten much better. they have signed up a ton of new chinese vendors. that was really one of the keys into the stock and i think it's something that a major tailwind to them now. >> steve, qualcomm is up after hours. >> it is. i think it was up 10% year-to-date, but if you look at internet of things and look at graphic processors nvidia is a name i have been talking about. it's up 60% year to late. that one doesn't have a real yield. so that's not a yield chase. that is a growth chase, and i think you're still good, believe it or not. >> yahoo! earnings call about to kick you have and netflix call is under way. we'll bring you the latest headlines right after this break. plus, the republican convention is in a degree of chaos tonight and it's barely even started. our own john harwood is on the ground in cleveland. john? >> simon, presidential nominating xhiths commissions

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we start with the chaos erupting on the floor of the national convention as anti-trump delegates make their best attempt to block trump's nomination. john harwood was there with the latest. was this expected? >> well, it's expected in this case because donald trump arouses such strong feelings but it's unusual for a major party convention. look, simon, nobody expected that the anti-trump forces were going to be able to deny him the nomination, but they wanted to register a protest. the way they chose to do that was by forcing a roll call vote on the party rules which bind the delegates, which set the procedures for the convention. they needed to have the majority of delegates in seven states demand a vote to get one. they were shouted down on the floor in an initial attempt.

then they presented their petitions. they had nine states registering the request for a vote, but the convention chair came out and said that three states had withdrawn their request for that vote. in other words, lobbying had gone on, and that produced this raucous protest that you can see on the floor with delegates shouting roll call vote. others say trump, trump, trump, or usa, usa, usa. it even caused after a while ken cuccinelli, former attorney general of virginia, a leader of ted cruz's campaign, to toss down his credentials on the convention floor and lead a walk-out of delegates. now, ken cuccinelli later picked up that credential and put it back on, but the point was registered. the idea was to reflect the depth of feeling of some of these delegates that they don't want donald trump as their nominee. he's now going to be their nominee. the protest is over unless they choose to revive it with their voices on the floor of the convention, but it was quite a moment. we don't see it often, and juns

as an unfortunate cap stone, we heard trump's motorcade was involved in an accident. nobody was hurt. >> john harwood, thank you very much. john harwood reporting live from the rnc in cleveland. outrage over trump going well beyond the convention floor. here is what our next guest says could happen to the markets if the republican candidate becomes president. >> i think whether it's the first day or the second day, when he puts those 35% tariffs on, he said that he anticipates a depression. well, maybe he knows something. maybe he knows he's going to be president, and maybe he know that is he's going to put on tariffs of 45% or 35%. that will cause a depression. >> and representative ron paul joins us live from taction. so welcome to the program. welcome back to the program, mr. paul. let me ask you, first of all,

about the scenes i'm sure you just saw at the convention there, on the convention floor in cleveland. what is your reaction to seeing that at such a convention? >> well, i thought it was rather typical. that goes on a whole lot, but the irony of all this is the republican party is in the position i was in four years ago trying to get attention and qualify for objection and qualify for a speech, and they just, you know, rolled me, and now trump is so powerful that he took over. he's rolling the republican party, the people who are unhappy with his winning the nomination. so there's a bit of irony there and a lot of republican -- ordinary republicans are boycotting the convention. it's messy, but that's pretty much what politics is all about. and it sort of bores me at times too because i sort of know the outcome. it's just a lot of fanfare and a lot of talk and the country just marches on with bad policies no matter what. >> what do you hope comes from the convention?

>> well, i'm not very hopeful at all. i think -- i don't think anything will happen. they've have a platform which is a far as. they have had platforms for years. nobody pays any attention to them and they fight and fume over this and, you know, reagan had get out of the department of education and the department of energy, but nothing happens. so they give lip service. so you might have, you know, a platform come out and say this is a good platform but it means absolutely nothing. this is a lot of fanfare and too often the momentum is so great for our policies whether it's the foreign policy or the federal reserve policy or the economic policies or trade poll and trump talks a lot about that, the momentum is so great no one person is going to shift it, and that's why i think we are destined to get into a lot of trouble, and i do think that people who are sort of favorable toward the market think donald trump is doing -- will do a good job. i'm less optimistic about that. >> so mr. paul -- >> i think some of his tone --

yeah? >> i saw you're not backing donald trump, but i'm having a hard time finding the overlap with hillary. gun control, immigration, taxes. where do you line up? you're more similar to him than to her, so is it a personal thing? i watched your career. i understand where you come from. but you are black and white to hillary. i don't get it. >> well, i've never said anything favorable to hillary. you know, what i think this election is all about -- >> but not -- sorry to interrupt. i don't mean to be disrespectful, but not backing him is backing her i would assume. you know that. >> well, that's somebody else's opinion, but if two people are equally bad, i'm not picking one over the other. you know -- >> are they equally bad though? >> well, i think that nobody is going to stop trump. if he's off on a tangent, he's the boss and he'll run roughshod

over everybody. if you have a republican congress, i like split , you know, power. if hillary is in there, we've been forewarned and republicans don't like her and they'll put road blocks in. if you have a republican congress you have a chance you might slow some of this stuff up. but on trump, trump is the boss and he's going to run roughshod. he's not going to listen to the congress or anybody else. >> ron, do you think any of trump's clear policy statements to this point are things that are going to be the same policy statements in six months? let's assume he gets elected and that's probably a big assumption. his policy statements, what are they and, you know, do you think they're even things we should be listening to? >> well, you should listen to him and find out they change around a whole lot. i mean, i don't hear him talking about -- i guess that clip from the tariffs of 35%, he doesn't talk much about that. one day he wants to get out of nato and the next day he says declare war even though it had nothing to do with our national

security. go to congress and declare war and then i'd hire out or i'd get nato to fight this war. one day he wants out. it's all over the place. so i wouldn't put a lot of stock in any of his comments that he makes. i hope that things would be better regardless, but, believe me, there are some things that aren't going to be changed, and with he have a prevailing attitude in this country that big government is okay. for a socialist to do as well as bernie sanders, i mean, what's the country coming to? and then we have with two people running for congress and the main attraction is who has the biggest negative? i think the person who comes in second place will be declared the most unliked person in the whole country because that seems to be what's going on in this campaign. so i don't think -- i don't think they're really dealing with the issues like spending and debt and the silliness of the federal reserve interest rates at 0%. they're not dealing with this and certainly they're not dealing with the seriousness of

our foreign policy which just drives us into more trouble when you look at our middle eastern policy. >> mr. paul, it's good to see you. thank you for spending the time. ron paul joining us live there from texas. >> thank you. >> let's trade it. gai? >> i don't know how you trade trump. i think everybody is in accord if he were to be elected it could be potentially disastrous for the markets. given what he said, knotts what i said, the only potential positive i could see him doing is allowing the repatriation of funds. if that were to happen, i think there would be a huge positive for the stock market. outside of that -- >> slashing corporate taxes. >> or slashing corporate taxes. >> there's a lot there potentially s there not? >> but the protectionist stuff is really bearish. >> there's certainly reasons to induce corporations to spend, to bring capitol back on shore. is that counter balanced though by tariffs and, you know, essentially isolating america from a trade perspective. again, i don't know that gets voted through.

this is what people need to understand. there's a balance of power. >> narrator: it's the political season but i will flip to the other side. if you vote for hillary clinton then you have to vote for ex-energy. it's a bigger epa. we know where she wants to go. it's higher taxes. you're left with juggling both. >> wouldn't you objectively say there's more risk around trump than there is around hillary? >> i don't know what anyone believes. >> because you have to -- >> hillary had a certain agenda when she was married to the president of the united states, and now she's dove tailed with president obama. so i don't really know where she truly stands. >> but it's more of the same versus the possibility that the tariffs go through -- >> when you think about how we're trading this election, the s&p 500 is up 6% on the year right now. if we don't have any sort of event that derail this is rally here and you're seeing the s&p up 10% on november 7th, i think all those people in the middle who may be undecided may be like, maybe everything is okay here. >> status quo. >>ened nand keep it going. why would you at 2200 in the s&p

if you're just voting with your wallet, why would you take the chance? >> i think the opposite of what you think. i think it would be an opportunity to sell. if we go into an election period where we're up 10% on the s&p on clearly -- we know the risks that we pushed out of the way and whether -- because i agree with you, we live in a world where volatility is too low and there are many, many risks out there. to say the election is actually an event higher, i think that's interesting. i think it would be -- if we continue up to 10% into november, that's an event -- >> i would make one important point and that's the lesson from the uk referendum is people didn't vote objectively with their pockets and with their wallets. they overrode it through a sense of emotion. and that's why it becomes a bigger wildcard. >> and we have regret. when you think about it, begret. >> by the way, welcome to the show. >> thanks, mates. >> i would say just to tim's point that, yes, it could be a selling opportunity as far as trading the market. i'm saying once we get out of this convention, hillary names her vp, she gets some momentum,

we get into the fall, there's no issues, she could start putting some distance between her and trump is my view. >> as we head to the break, here is a look at netflix plunging on a massive subscriber miss. that call now well under way. we will hear from ceo reed hastings as to what he's been saying. plus, we're going straight to the course with the co-founder of netflix, mitch lowe, for hissen sta instant re to the quarter and the one thing he says the company needs to do now to get back on track.

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welcome back to "fast money." the big news this evening, netflix plunging on earnings. julia boorstin has been monitoring the call and has the latest. >> netflix's lower than expected subscriber growth is what is weighing on netflix shares now off 13.5%. the company adding 1.7 million new subscribers in q2 compared to the 2.8 million that wall street analysts had expected and the company projected 3.5 million. reed hastings saying people are adding the service at the same rate as expected but the cause for disappointment is more

people than expected are dropping the service because of price hikes kicking in. >> people don't like price increases. we know that. it's a necessary phase for us to get through, and then with the increased revenue we're continuing to invest in better and better content. so that's what makes us feel very strong and positive about the long-term and that this is a short-term phenomena. >> hastings saying he's confident netflix will be able to reach the 60 to 90 million members here in the united states he had previously discussed. as the company rides a wave of disruption in traditional tv. >> smart tvs are considering to sell. people are using internet video and television more and more. you see the rise of these virtual mpdes. and i don't see why 10, 20 years from now why every american household isn't subscribing to netflix except for maybe competition. >> there's been quite a bit of

talk on the conference call going on right now about netflix's ongoing investment in original content. they're saying it is paying off, especially in the local markets where they're investing in content and infrastructure. and, simon, while they wouldn't reveal any viewing numbers, they did say that total user viewing continues to grow. back over to you. >> julia, thank you very much. for an additional perspective on what is a massively disappointing quarter for many, past ceo and netflix co-founder mitch lowe joins us on the fast line. thank you for joining us on the show. it's great to have you here. >> thank you. >> do you believe still as reed hastings does that the pros tpes for the company are strong and positive? >> i do, i do. i think this is a one time or a unique event where they're raising prices and they've got all these subscribers grandfathered in, and there's, you know, quite a number of other headwinds, but long-term i

think reed is right, that the american public is moving faster and faster toward internet supplied tv. >> mitch, they've laid out some numbers or there's some estimates that people expect maybe 200 million global subscribers in five years or so. can they get there on their own or do they need some benefit from like a network effect of a larger partner because the ground is moving so quickly below their feet. they were first mover but can they do it alone? >> no. i do agree they need partners, and i think they're showing that by working with comcast. you know, they need to get china and they need to work with partners in order to supply the service both through the cable as well as online. >> reed hastings said in that clip there on the conference call that everyone in his view will be watching netflix unless perhaps there was greater competition, and, of course, the fear for many is that amazon in particular ups its games and maybe rebrands and is better

able that take on netflix. as a strategist, how concerned would you be that that is possible and what should the response be from reed hastings and the current team? >> yeah. you know, it's no longer the most sophisticated operation and most sophisticated content provider around, so i think competition is going to continue to get, you know, fiercer and fiercer, and amazon i think is just one example. you know, hbo as it starts to peel off subscribers, that will also have an impact, and then the total aggregate of all these little mini subscriptions many consumers will have will start to get them to evaluate which ones to keep and which ones to jettis jettison, and i think as the price creeps up for netflix, that's where it gets a little bit dangerous, and i think that's one of the reasons they're seeing a little bit of a decline in the renewals of these older customers. >> okay. mitch, thank you for sparing the

time. mitch lowe joining us there, co-founder of netflix. what do you think? >> well, i think it's interesting to hear him acknowledge that actually there's a lot of competition and that this whole grandfathering effect or ungrandfathering is not positive. i don't want to put words in mitch's mouth. i think it's not positive. i think there's enormous competition for the commoditized part of their con trent ptent p which is stuff i dial up for my kids or stuff i can get anywhere. the amount of money they're pouring into original content i think is crazy. it's not working in japan. it's not going to work the same way there. >> mitch said they need china. i think china has got to be a huge wildcard. i get the numbers. i understand the population. i know how he's overlaying the numbers domestic and overlaying it with china but i think it's a huge wildcard and to pin your hopes on china i think is unrealistic. >> if you can't raise the penetration at home. >> they have a lot of issues as far as original content and partnerships over there, and i guess my main point for mitch is that at some point and bob peck said it, these guys are not just

going to need cable partners. maybe it's some sort of international thing -- >> facebook, aple? >> mobil lprobably apple. >> why not content? >> time warner, there you go. that's what we've got in 2000. that was the original dream. i suspect it has something more with content delivery than content. that's my guess because of the way people are consuming the content. >> beginning of the show we talked about one of the levels to watch, go back february 8th, $79.95 low. it closed at $83. it has bounced since the show started. if you want to trade, believe it or not, you trade it on the long side against $83. >> netflix isn't the only company traders see having a big move on earnings. dan, walk us tlhrough the actio if you will. >> netflix went out with a $42 billion market cap. down $13, 14 bucks. that is a monster, monster move. one of the reasons why we talk about these implied moves,

because it gives you a sense for sentiment into the earnings report. microsoft this, is the granddaddy of them all. obviously, you know, just a few ticks behind apple as far as largest market caps in the world. this one has about 465 billion. it's expected to move when they report tomorrow night after earnings. 4.5% in either direction. that's $19 billion move in either direction. that's what options traders are expecting. for microsoft and qualcomm, we were just talking about it. expectations are low. traders are expecting a 4.5% move in either direction. that's about $6 billion in market cap. and lastly, this is one, at&t is very interesting. people are not buying this for growth. they're buying it for yield. the stock has had a monster move. massive outperformer. 2% move in either direction. it's not generally a big mover on earnings but that's $5 billion. i just want to go to the charts really quickly here. you know, look at microsoft. it's still below this gap level. last quarter it gapped down 10% on disappointing ru89s aresults

and guidance. i'd say it's the midpoint of the range. if you're long the stock, maybe sell calls, add to the yield. >> thank you very much. for more options action, check out the full show 5:30 eastern every friday here on cnbc. still ahead in this show, yahoo! out with an earnings miss. did marissa mayer make any mention of the big sale on the conference call? we've got the headlines right after the break. you're watching "fast money" on cnbc, first in business worldwide. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool.

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get some of our most advanced products at a great price with over $500 in savings. call today and ask how to get these savings plus a $250 prepaid card. comcast business. built for business. welcome back to "fast money." yahoo! without with an earnings miss. the call is underway. josh lipton has the details. josh? >> well, simon, in what could be yahoo!'s last earnings call, ceo marissa mayer starting off that call by addressing the question, of course, investors have, which is that ongoing sales process. here is what she had to say. >> our board's independent strategic review committee, which is leading a well run robust process continues to manage this effort, and we are making great progress. while we have no announcement today, i can say we are deep into the process of evaluating proposals and alternatives and will update our shareholders as soon as it's prudent.

>> mayer pivoting to highlight adjusted ebitda of $172 million. in her words yahoo! is now cleaner, faster, and more personalized. talked to analysts on the street. they still think core yahoo! could fetch as much as $6 billion to one or more multiple bidders and that the deal could close in the second half of the year. so we wait and see. simon, back to you. >> okay, josh. thank you very much. so, team, apart from identifying a huge market possibility there, media training at yahoo!, what do you think of what they're sayin sayi saying? >> i think it doesn't matter. when you look at the parts, i think you're at a place where it's somewhere around six times ebitda, seven times and it's five or six, 5 to $7 billion. i'm someone that owns the stock

and thinks they will find some efficiencies -- >> this is a 43, $44 stock. i think that's conservative. >> well, i actually think it's lower than that. i think the stock has done nothing. hasn't done anything since march. i think it's baisically factore in. i think it's $2 either side of it. the market is just doing their arithmetic on it. i don't know if you get tremendous upside. >> alibaba has had trouble at 85 bucks since i want to say october/november. it's trying to get through there again. i think it's trading $83. alibaba through $85 i think gets you tim's $43 in yahoo! but in terms of business, paid clicks and search was down 24%. so, again, you have a declining business, but you're buoyed by the fact that alibaba seemingly wants to go higher here. >> i would just say that the quarter they just did for revenues was the lowest in more than ten years. you have a declining asset. i would be surprised if you jae a price near the high end of the estimates. jup next on the program, the final trade.

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the chances of being involved in a car crash are far greater than lightning strikes and plane crashes. and if you are texting while driving, your risk of crash increases 23 times. now, i may be an unlucky guy, but i don't have to be part of that statistic, and neither do you. drive responsibly. okay. let's get the final word from bob peck. bob? >> so quickly on netflix, for any investor here it's got about three things. your belief in the subs, long term internationally, that profitable and whether you're willing to way the valuation of 40 times e bait da. on yahoo! the quarter is irrelevant. it's about the efficiency of the core. >> let's go around the horn. this is going to be tight. >> chips, intel, it's a range trade. you fade this one.

>> kellogg. buy. >> dan? >> ibm, i wouldn't chase it at 164. >> guy? >> qualcomm into earnings like carter worth says. >> that was very good. ten seconds around the horn. i'm simon hobbs. catch "fast money" again at 5:00 eastern. the my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now! hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i just want to make you some money. so call me 1-800-743-cnbc or tweet me @jimcramer. i had a little scare this morning. i picked up my copy of the