DMA compliance in focus as companies brace for March enforcement, Reddit eyes March for IPO and other notable stories from this week
Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.
FOR A SMALL FEE:
Apple (AAPL) plans to add new fees and restrictions after allowing app downloads outside the App Store in the EU, including reviewing apps downloaded by users, The Wall Street Journal’s Aaron Tilley, Salvador Rodriguez, Sam Schechner and Kim Mackrael reported. Meta (META), Spotify (SPOT) and other companies are weighing new options for customers as Apple makes changes to comply with new European law.
CALIFORNIA STAYING:
BXP (BXP) announced that it has signed a ten-year, approximately 467,000 square foot, multi-building lease extension with Snap (SNAP) at Santa Monica Business Park.
DMA COMPLIANCE:
Meta said that people using Instagram and Facebook in the EU, EEA and Switzerland will soon be offered several choices about how they would like to manage their experiences across Meta products. “We are offering these choices to address the requirements of the DMA, which enter into force in March 2024,” the company said. Over the next few weeks, people will receive notifications that will inform them about their ability to choose whether they would like to share information between the company’s services. People who have already chosen to connect their Instagram and Facebook accounts will be able to choose either to continue to connect their accounts through our Accounts Center so that their information will be used across their Instagram and Facebook accounts or to manage their Instagram and Facebook accounts separately so that their information is no longer used across accounts.
AI-CENTRIC COMPUTING:
Meta’s Mark Zuckerberg plans on acquiring 350,000 Nvidia (NVDA) H100 graphics cards. On Thursday, Mark Zuckerberg, CEO of Meta (META) said in a blog post to his Instagram account: “Some updates on our AI efforts. Our long term vision is to build general intelligence, open source it responsibly, and make it widely available so everyone can benefit. We’re bringing our two major AI research efforts (FAIR and GenAI) closer together to support this. We’re currently training our next-gen model Llama 3, and we’re building massive compute infrastructure to support our future roadmap, including 350k H100s by the end of this year — and overall almost 600k H100s equivalents of compute if you include other GPUs. Also really excited about our progress building new AI-centric computing devices like Ray Ban Meta smart glasses. Lots more to come soon.”
STATE LAWSUITS:
“Iowa Attorney General Brenna Bird sued TikTok for deceiving Iowans, particularly parents, by lying about children’s widespread access to inappropriate content on its social-media app. “TikTok has kept parents in the dark,” said Attorney General Bird. “It’s time we shine a light on TikTok for exposing young children to graphic materials such as sexual content, self-harm, illegal drug use, and worse. TikTok has sneaked past parental blocks by misrepresenting the severity of its content. But no longer. As a mom and prosecutor, I am committed to equipping parents with information to keep their kids safe and to holding TikTok accountable.” The lawsuit explains that TikTok:Claims a “12+” rating in Apple’s App Store, despite frequent and intense adult content, including: Sexual content and nudity Profanity and crude humorMature and suggestive themes….”
Children using Instagram and Facebook have often been targets of sexual harassment, according to a 2021 internal company presentation that estimated 100,000 minors receive sexually abusive content every day, Katherine Blunt and Jeff Horwitz of The Wall Street Journal noted. The finding is among unredacted material about the company’s child safety policies related to a previous lawsuit filed by New Mexico alleging Meta recommended sexual content to underage users and promoted underage accounts to predatory adult users. In one 2021 internal document, Meta employees noted its recommendation algorithm, called “People You May Know,” was known among employees to connect child users with potential predators.
BOWING OUT:
In a regulatory filing, Meta Platforms confirmed that on January 16, Sheryl Sandberg notified the company that she has decided not to stand for re-election to the company’s board of directors at the company’s 2024 Annual Meeting of Shareholders. Sandberg will continue to serve as a director until the date of the Annual Meeting, Meta noted.
LOOKING TO JOIN THE RANKS:
Reddit is planning to launch its IPO in March, Reuters’ Echo Wang and Anirban Sen wrote, citing people familiar with the matter. Reddit filed confidentially for its IPO in December 2021, the report notes.
Oppenheimer said Snap shares are pricing “overly optimistic” advertising revenue growth, “despite challenges of a sub-scale platform.” With competition continuing to increase, it will be difficult for Snap to grow share of social time spent, the analyst told investors in a research note. Meanwhile, the company has not been willing to integrate third party service providers, which would deepen its advertiser bench, says Oppenheimer. The firm believes Street estimates appear aggressive going into Q4 and reiterates a Perform rating on Snap.
Citi raised the firm’s price target on Meta Platforms. With the broader online advertising environment strengthening in Q4, Citi’s Reels tracker suggests Meta’s Q4 advertising load expanding, the analyst tells investors in a research note. The firm also believes Meta’s newer ad products are attracting greater demand. Citi thinks Meta’s monetization efficiency through newer ad products and advertiser adoption is ramping. Meta remains the firm’s top pick across the internet sector for 2024. The company’s engagement continues to expand as it benefits from a multi-year product roadmap, Citi contended.
At Stifel, Sprout Social’s (SPT) price target was raised ahead of the company reporting Q4 earnings in February. In conversations with customers and partners, the firm repeatedly hears of platform loyalty, even after pricing increases, reaffirming its belief in the value of Sprout’s offering, the analyst told investors.
JMP Securities raised the firm’s price target on Meta Platforms. The firm’s checks suggest the digital advertising market was healthy in 4Q23 with strength continuing in January, and the firm expects broadly positive reports from its digital advertising coverage universe this quarter, the analyst noted. Meta remains JMP’s top pick in its advertising coverage.
Argus upgraded Pinterest (PINS). More than half of the company’s users have intention to purchase prior to visiting the Pinterest platform, and the firm sees more of these users, higher engagement, increased ad prices and higher ad loads to drive growth, the analyst said. In order to increase shopping, Pinterest is adding products, using AI to make better recommendations, and partnering with Amazon (AMZN) to increase ad loads and add new advertisers, Argus added.
Bernstein raised the firm’s price target on Meta. After a generational performance in 2023, Meta’s stock is still a good investment, Bernstein contended. The firm notes that Meta’s leaner cost base and newfound spend discipline seems to be well understood, and it will also take time for investors to fully appreciate Meta as an AI winner. For Meta’s stock to work in 2024, revenue growth needs to once again outpace the digital ad market and Consensus, Bernstein argues. Despite some structural challenges with short-form video, the firm believes Meta can increase ad load, improve conversion rates, and keep driving up engagement to the tune of about $2B in incremental 2024 ad revenues, or 150bps-200bps of revenue growth.
Exane BNP Paribas downgraded Zoom Video (ZM)
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Originally Posted January 2024 – #SocialStocks: Iowa sues TikTok as New Mexico’s Meta lawsuit sheds light
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