#SocialStocks: Meta Scolded by Congress for Recalled Products on Marketplace

NYC takes a stand against Tik Tok, Meta hardens on return to office 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.

BLACK MARKETPLACE:

 A group of bipartisan lawmakers wrote Meta Platforms (META) a letter telling the company it is not doing enough to prevent users from selling recalled products on its Facebook Marketplace, Alyssa Lukpat of The Wall Street Journal reported. Four Congress members wrote the letter to CEO Mark Zuckerberg, claiming his company’s actions have risked public safety. “Meta’s failure to prevent recalled products from being posted for sale on its platform has resulted in your users and their children being placed at risk of purchasing and using a product that CPSC has found to pose a serious risk of injury and potential death,” the letter said, according to the Journal.

SHARE SALE: 

In a regulatory filing, Pinterest (PINS) chief people officer Christine Deputy disclosed the sale of 45,153 class A common shares of the company on August 21 at a price of $27.2645 per share.

EARNINGS RECAP: 

Zoom Video (ZM) shares climbed over 4% following its beat and raise second quarter. “Our mission of delivering limitless human connection remains core as we continue to innovate and expand our platform to help bring value and enhanced productivity to our customers with new AI features like Zoom IQ Meeting Summary and Team Chat Compose, as well as Intelligent Director. I’m also proud of the team for reinventing modern customer experiences with Zoom Virtual Agent and Zoom Contact Center, which surpassed 500 customers in Q2,” said Eric S. Yuan, Zoom Founder, and CEO. “In addition to delivering innovation to our customers, in Q2 we delivered GAAP EPS of $0.59 and non-GAAP EPS of $1.34, both up meaningfully year over year. With this strong operating discipline, we grew operating cash flow by 31% year over year to $336 million.” Separately, Cathie Wood’s ARK Investment bought 122.8K shares of Zoom Video yesterday.

RBC Capital maintained an Outperform rating and $95 price target on Zoom after its Q2 earnings beat. The company reported a decent beat-and-raise against a low bar, with revenue upside driven by better-than-feared Enterprise growth as Phone/ZoomOne cross-sell momentum continues, the firm told investors in a research note. Visibility into a reacceleration in Enterprise sales remains unclear, but RBC remains “optimistic” on Zoom Video’s long-term story, especially with $6B on the balance sheet and a compelling valuation, RBC Capital added.

BACK TO THE LAB: 

Meta is reportedly taking its return to office, or RTO, communications seriously and updated its guidance on its RTO policy last week, according to Kali Hays and Hugh Langley for Business Insider. Meta’s human resource chief wrote in a memo “that all employees ‘assigned to an office’ would be required to work from that office or otherwise participate in in-person work at least three days a week,” noted BI, citing a company memo. Meta workers already mandated as work from home employees may continue working remotely, noted the story.

ADDRESSING TEEN SAFETY: 

In a blog post, Pinterest said, “Today, we’re announcing a suite of updates to features that will expand the ways we’re protecting our users’ personal space. These new features, which will begin rolling out this week, will include the launch of private profiles, more control over your followers, improved options for collaborating only with people you know, and the ability for parents to easily opt in and out of a parental passcode for teens…Pinners age 16 and over will be able to opt into a private or public profile. Once private, you will still be able to connect with your friends and family by sending a unique profile link. Private profiles are not discoverable by others on the platform and will remain the default and only option for teens under the age of 16…You will have even more control over who gets to follow you. For teens under the age of 16, followers will be removed so that they can decide who gets to follow them and only collaborate with people they trust. In addition, all users will be able to review and remove followers…We’re enabling more ways to help you make decisions about who can and can’t contact you. Messaging and group boards will be available to all users, as long as you give them permission. Teens under the age of 16 will only send and receive messages from mutual followers who have been accepted through a unique profile link that expires after 3 days or when they get 5 new followers with the shareable link, whichever comes first…Parents and caregivers can already opt to require a passcode to change certain account settings for their teens. We are giving caregivers the ability to easily opt-in and out of the parental passcode and update the protected settings on their teen’s account. Additional information on how to change permissions and more resources for caregivers can be found in our Help Center.”

THREADS FOR WEB: 

Meta Platforms plans to launch a web version of microblogging app Threads early this week, Salvador Rodriguez and Meghan Bobrowsky of WSJ wrote. Adam Mosseri, head of Instagram, said on Friday that the web version of Threads would be launching soon and is already being tested internally at Meta. People familiar with Meta’s plans told the Journal it will launch early this week, although the launch plans aren’t final and could change, reports the paper. Threads is an alternative to X, formerly know as Twitter (TWTR).

TRANSITION: 

According to a regulatory filing, 0n August 17, 2023, the board of directors of Pinterest approved the transition of Benjamin Silbermann from executive chair of the company to non-executive chair of the company effective as of August 18, 2023. The company said this transition is not the result of any disagreement with the Company or its board on any matter relating to the company’s operations, policies or practices.

CODE LLAMA: 

Meta is preparing to release a free open-source code-generating AI model dubbed Code Llama as soon as next week, The Information’s Kevin McLaughlin, Amir Efrati and Stephanie Palazzolo reported. According to two people with direct knowledge of the product, the new coding model rivals OpenAI’s Codex model and builds on Meta’s Llama 2 software.

TIMES UP: 

A directive issued on Wednesday banned TikTok from city-owned devices starting immediately after a review by the NYC Cyber Command, noted Makena Kelly for the Verge. A city official said the NYC Cyber Command discerned that the social media app “posed a security threat to the city’s technical networks” and should be remolded by city agencies within 30 days, added the Verge story. “While social media is great at connecting New Yorkers with one another and the city, we have to ensure we are always using these platforms in a secure manner,” a New York City Hall spokesperson said, in a statement to The Verge, according to the story.

ADDITIONAL ANALYST COMMENTARY: 

Bernstein lowered the firm’s price target on Zoom Video. Zoom’s growth slowdown from Covid levels seems to have bottomed and is starting to show some slow bounce back, though the growth is not rapid, the analyst tells investors in a research note.

Citi also raised the firm’s price target on shares of Zoom. The company’s Q2 report “initially appeared quite solid,” with a “healthy” beat as revenue upside came from the enterprise segment with ZM Phone strength, the analyst tells investors in a research note. That said, the upside was partially one-time driven with revenue pull-forward, a softer Q3 billings and weaker second half revenue outlooks, the firm told investors.

Wedbush initiated coverage of Meta Platforms. The firm believes Meta is well positioned against an improving backdrop for digital advertising that should support accelerating revenue growth in the second half of 2023 and into 2024. Further, the company’s “year of efficiency” has created a clear path to continued margin expansion as revenue growth resumes in earnest in Q3, Wedbush noted. In addition, Wedbush initiated coverage of Pinterest with a Neutral rating and $30 price target. Pinterest has strategized a path to monetization, but it competes with global leaders such as Google and Meta who provide a more robust offering for advertisers, contends the firm. Wedbush believes there is some execution risk as the company scales its monetization efforts.

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Originally Posted August 23, 2023 – #SocialStocks: Meta scolded by congress for recalled products on Marketplace