Welcome to "#SocialStocks," The Fly’s weekly recap of Wall Street’s reactions to social media stock news.
TECHNICAL DIFFICULTIES: In an interview with the Financial Times, the CEO of Sony (SONY), Kenichiro Yoshida, noted that cloud gaming is "very tricky" but that the company will look into "various options" "for streaming games over the internet", adding that Sony could use "GT Sophy, its artificial intelligence agent, to enhance cloud gaming," reported the FT. "I think cloud itself is an amazing business model, but when it comes to games, the technical difficulties are high," …So there will be challenges to cloud gaming, but we want to take on those challenges," said Yoshida, according to the outlet. The Fly notes that other companies in cloud gaming include: Microsoft (MSFT), Ubisoft (UBSFY), Meta Platforms (META), Alphabet (GOOG), Amazon (AMZN) and Roblox (RBLX).
ADVERTISING WOES: Despite Elon Musk’s claims that Twitter’s (TWTR) advertising business was on the upswing and the company "could soon become profitable," the social media firm’s advertising revenue "for the five weeks from April 1 to the first week of May" was down 59% from the same period last year, wrote Ryan Mac and Tiffany Hsu for the New York Times. "The company has regularly fallen short of its U.S. weekly sales projections, sometimes by as much as 30 percent, "says the NY times, citing an internal presentation from Twitter.
AI AT YOUR ASSISTANCE:: Zoom Video (ZM) launched key features of Zoom IQ, a smart companion that empowers collaboration and potential through generative AI. Now available through free trials for customers in select plans, the Zoom Meeting summary and Zoom Team Chat compose features will help teams. "With the introduction of these new capabilities in Zoom IQ, an incredible generative AI assistant, teams can further enhance their productivity for everyday tasks, freeing up more time for creative work and expanding collaboration," said Smita Hashim, chief product officer at Zoom. "There is no one-size-fits-all approach to large language models, and with Zoom’s federated approach to AI, we are able to bring powerful capabilities to our customers and users through Zoom’s own models as well as our partners’ models."
LATEST IN HEADSETS: Apple (AAPL) has purchased L.A.-based augmented reality startup Mira, which makes headsets for other companies and the U.S. military, The Verge’s Zoe Schiffer and Alex Heath reported, citing posts from the CEO’s private Instagram account and a person familiar with the matter. The news comes just a day after the tech giant unveiled the Vision Pro mixed reality headset, the authors said. This news follows the Wall Street Journal’s Aaron Tilley report that Apple is set to launch its VR headset on Monday, and the first major product in nearly a decade is likely to overshadow the conference’s announcements of new tools and functions for the iPhone and other devices. Apple has been working on the headset for seven years and has delayed the launch several times, The WSJ previously reported. The headset is expected to cost $3,000, more expensive than headsets sold by rivals like Meta’s Quest Pro headset, which costs $1,000.
On a related note, Meta announced Meta Quest 3, its next-generation virtual and mixed reality headset, launches later this year. "It features higher resolution, stronger performance, breakthrough Meta Reality technology, and a slimmer, more comfortable form factor. Quest 3 will ship in all countries where Meta Quest is currently supported this fall. The 128GB headset starts at $499.99 USD, and we’ll offer an additional storage option for those who want some extra space. Mark your calendars because we’ll have lots more to share at Meta Connect, which returns this year on September 27… We’re excited for Quest 3 and look forward to sharing more later this year at Connect. But what about Quest 2? Meta Quest 2 changed the face of VR when it first hit the scene in 2020, ushering in a new era of gaming, fitness, and more. It’s already one of the most affordable ways to get into VR – and it’s about to get even better. Starting June 4, we’re lowering the price of Quest 2 to $299.99 USD for the 128GB SKU and $349.99 USD for the 256GB SKU, helping even more people access the magic of all-in-one VR and our vast content library. But that’s not all! In an upcoming software update, we’re updating the Quest 2 and Quest Pro GPU and CPU. Quest 2 and Pro will see an up-to 26% CPU performance increase with an up-to 19% GPU speed increase for Quest 2 and 11% for Quest Pro," Meta stated in a post to its corporate site.
ANOTHER ONE BITES THE DUST: A second senior executive in charge of content and safety issues has left Twitter, Suzanne Vranica, Patience Haggin, and Alexa Corse of The Wall Street Journal reported, citing people familiar with the matter. Twitter’s head of brand safety and ad quality A.J. Brown has left the company, the sources told the Journal. This comes shortly after the departure of Ella Irwin, Twitter’s head of trust and safety.
THREE DAYS A WEEK: Meta will require employees assigned to an office to start coming in three days a week, effective September 5, The Wall Street Journal’s Ginger Adams Otis reported. The change won’t affect workers who currently have remote positions, the report noted. "We’re confident people can make a meaningful impact both from the office and at home," a Meta spokesperson said, adding that the change is meant to foster "the collaboration, relationships and culture necessary for employees to do their best work."
QUESTIONS OF LEADERSHIP: House Committee on Oversight and Accountability Chairman James Comer, R-Ky., is opening an investigation into President Biden’s Federal Trade Commission, FTC, appointee Chair Lina Khan. FTC Commissioner Christine Wilson recently resigned from her role after concerns about the integrity of the FTC under Chair Khan’s leadership, citing abuses of power and disregard for the rule of law and federal ethics standards. In a letter to top officials at the FTC, Chairman Comer is requesting documents and communications to understand these allegations and Chair Khan’s actions in this role. "The Committee on Oversight and Accountability is investigating matters raised by Commissioner Christine S. Wilson’s February 14 announcement of her unexpected resignation from the Federal Trade Commission . Commissioner Wilson declared her intent to resign over deep concerns that the Commission, under current Chair Lina M. Khan’s leadership, is abusing its power and disregarding the rule of law, due process, and federal ethics laws. We seek documents and information to shed light on Commissioner Wilson’s allegations and determine the extent to which the Commission has deviated from its mission to protect America’s consumers," Chairman Comer wrote.
NO NEWS IS GOOD NEWS: Meta spokesman Andy Stone released a statement on the California Journalism Preservation Act: "If the Journalism Preservation Act passes, we will be forced to remove news from Facebook and Instagram rather than pay into a slush fund that primarily benefits big, out-of-state media companies under the guise of aiding California publishers. The bill fails to recognize that publishers and broadcasters put their content on our platform themselves and that substantial consolidation in California’s local news industry came over 15 years ago, well before Facebook was widely used. It is disappointing that California lawmakers appear to be prioritizing the best interest of national and international media companies over their own constituents."
ANALYST COMMENTARY: JMP Securities raised the firm’s price target on Meta Platforms to $300 from $270 and kept an Outperform rating on the shares. The firm says Instagram’s global DAU accelerated in May, with U.S. DAU returning to y/y growth after 11 quarters of y/y declines, highlighting the success of Reels capturing incremental engagement, the analyst tells investors in a research note. The firm believes Instagram represents about 1/3 of Meta’s ad revenue, and Instagram’s U.S. April and May time spent growth of +17% y/y and +19% y/y, respectively, should be incremental to monetization as JMP projects +9.5% y/y ex-FX advertising growth for 2Q23.
Oppenheimer analyst Jason Helfstein raised the firm’s price target on Meta to $350 from $285 and reiterated an Outperform rating on the shares. Meta is well positioned to drive higher pricing and engagement from its artificial intelligence investments, the firm told investors in a research note. The firm believes these investments have been the major reason for the company’s outperformance verses the digital advertising market in Q1 and should support outperformance though 2024. Addition, Opco sees AI as a total addressable market "expander" for Meta into e-commerce marketplaces and small business customer support, but of which it says are not currently in estimates. It sees the stock as "highly attractive at current levels" despite being up 125% year-to-date.
Piper Sandler analyst Thomas Champion maintained an Overweight rating on Pinterest (PINS) with a $31 price target after digging into the company’s partnership with Amazon.com (AMZN). While details are limited on the partnership, "the construct is compelling," the firm said. The firm thinks the alliance should be "win-win" and sized the third party revenue opportunity for Pinterest at mid-single-digit upside in 2024 and higher in 2025. The opportunity could be "much larger" if Pinterest sees exposure to all Amazon advertisers, writes Piper. It thinks the partnership at its most basic level is for the purchase of third party ad sales via Amazon’s demand-side platform. Amazon will take a cut of ad sales and in return Pinterest will reserve inventory for Amazon, the firm contended.
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