Citi Managing Director Jason Bazinet and Annandale Capital Founder and Chairman George Seay join Yahoo Finance Live to discuss the issues and delay for the "Love Is Blind" live reunion on Netflix, the streamer's password sharing crackdown, and the outlook for the company.

Video Transcript

DAVE BRIGGS: Love may be blind, but for investors, not so much. Shares of Netflix took a hit today, down about 2% after "Love is Blind Reunion," the live show was anything but live. Netflix tweeting, quote, "To everyone who stayed up late, woke up early, gave up their Sunday afternoon, we are incredibly sorry that the 'Love is Blind' Live Reunion did not turn out as planned."

So what's the damage here, and what should investors expect when the streamer reports earnings tomorrow? Citi managing director Jason Bazinet and Annandale Capital founder and chairman George Seay join us now. Good to see you. George, I know you're a huge fan of the "Love is Blind" franchise. You never miss a single episode. What's the impact of this mess-up last night that really was viral?

GEORGE SEAY: Yeah, thanks for having me on. Yeah, I not only don't miss it, I tape it so I can watch it again and again and again. I think it's inconsequential. I think Netflix stock has been a huge winner for investors over the last year and has a great long-term future. Our team here loves the stock. If I was an investor, though, I would temper my expectations for the next six to nine months. It's had a huge run. It's probably going to have to process and correct some on the going forward basis unless they just nail their earnings because the multiple the Street is going to assign to this company really depends on how fast they're growing.

INES FERRE: Jason, do you agree with George's assessment that it's inconsequential? I mean, what is the future for Netflix when it comes to live?

JASON BAZINET: Yeah, I think it's totally inconsequential. No one likes to see customers get disappointed, but live is a very, very small percentage of all the hours that they stream. We know technically it's possible to do live events over the internet. So it's just a matter of provision, sufficient capacity, and fixing it. But it's just a minor blip. Not really material for the stock at all.

DAVE BRIGGS: It ain't easy being live. George, more on your outlook for Netflix, why the slightly bearish outlook?

GEORGE SEAY: I just think any time a stock doubles, a very mature large company doubles in a year, you have to start getting cautious unless it starts trading at five times earnings. And Netflix got down in the low teens kind of earnings multiples, but it never got into single digits. And now it's back up to 25 to 30 times earnings, depending on what they earn going forward. So I just immediately get, unless a company is growing at close to its multiple, I want to get more cautious about that.

And we still hold the stock, though. We haven't sold any stock. We wrote some put options on it, and we hold the stock and we continue to hold the stock. So we like the company. And we think it's one of those few American companies that's going to be around for a long time and generate gobs of cash flow. And I saw that y'all published an article today that basically said that one of the great big factors about how great Apple is as a company is how much stock they buy back. And I would encourage Netflix management to look at it the same way, use a lot of their free cash flow to buy back their stock.

DAVE BRIGGS: Is there anything, though, that could change your short-term bearish call in that earnings report tomorrow, George?

GEORGE SEAY: Yeah, if they blow out the numbers way beyond the beat that the Street's expecting, I might change my tune a bit, but not aggressively so. As the stock goes into the high 300s or low 400s if it gets there this year, I'd be a seller of at least some of my position in that kind of range. But right now, we're happy to hold. And I would say also, on the live streaming snafu, I'm sure Hollywood is snickering today, and they're getting some short-term points for beating up their competitor. But as we said, it's just going to be here today, gone tomorrow for Netflix.

INES FERRE: And Jason, you have a buy rating on the stock. So what are your expectations for when they announce? What are you looking for?

JASON BAZINET: Well, yeah, I think the challenging thing for Netflix to me is that this story used to be real simple where the Street would just measure net additions as a proxy for how healthy the company is. The problem right now is you've got two narratives running through the net ad number, right? You've got the ad tier, which I think is going to be quite positive for net ads over the next three to four years. That's the signal. The noise part of it is they're simultaneously cracking down on password sharing. And that causes near-term churn to go up. And so it's going to be a little bit challenging for the Street to try and interpret these numbers when you have these two initiatives running through the income statement at the same time.

So I think George is right. Like, you could end up having a little bit of a pause. I'd even go one step further and say that the trouble for the Street and the thing they're really focused on is, when are they going to crack down on password sharing in the United States, their biggest market. As soon as that happens, the churn rate is going to go up.

So what does that mean? Heading into this print, if they end up smashing expectations for Q1, but then they announce that they're going to crack down on password sharing in Q2 or Q3, the Street's going to be unwilling to extrapolate that subscriber growth or strength into the second or third quarter because they're going to say, well, the password sharing crackdown is going to cause more churn. And so we just need to get through all of this password sharing noise and just get back to the signal, which is the benefit of the ad tier.

DAVE BRIGGS: And George, what's the one either number or piece of commentary that you will be zeroed in on when they report?

GEORGE SEAY: Boy, that's a great question. I don't think I have any one thing in particular I'd like to point to. I said about six months ago to you all on this same security that I want to see how management executes. I think how the leadership of Netflix runs the business and how they perform up and down the value chain in terms of revenues, margins, ads, everything that they do to produce a higher earnings capacity and a higher stock price, I'm going to be paying keen attention to, because I think it's gotten large enough to where great management can really make a difference at these levels.

I think it's made a difference at Apple. I think it's made a big difference at Microsoft. And I think that's a big factor in terms of what kind of multiple the Street's going to give this company going forward because I think that's very uncertain, and I think that at under $200 a share, I could stand a lot of uncertainty and not worry about it. But at 330 or so, it gets more troublesome and difficult.

INES FERRE: And Jason, we were just talking to our reporter Allie Canal about a potential writers strike. How would this affect Netflix?

JASON BAZINET: Yeah, I don't think you want a writers' strike. I understand the comment you made about Rich Greenfield saying it'd be good for cash flow, but-- and that's just sort of tactical. But I think at the end of the day, the Street doesn't like uncertainty that comes with a strike. It's going to just inject more noise as the cadence of new content slows down. It might help margins, but generally, the Street doesn't like strikes.

DAVE BRIGGS: Indeed. All right, Jason Bazinet, George Seay, good to see you both. Thanks for that conversation.