#SocialStocks: Meta Starts Process Of Ending News Availability In Canada

Social media companies report earnings, X CEO turns to Hollywood following rebrand 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.

ROBLOX UPDATE: 

Roblox (RBLX) founder and CEO David Baszucki said that the company has seen “well over” 1M downloads of Roblox Beta on Meta Quest (META) after the beta went live on July 27.

AI LATEST: 

Meta introduced AudioCraft, its latest AI tool that generates “high-quality, realistic audio and music from text.” AudioCraft consists of three models: MusicGen, AudioGen and EnCodec. MusicGen, which was trained with Meta-owned and specifically licensed music, generates music from text prompts, while AudioGen, which was trained on public sound effects, generates audio from text prompts. “Today, we’re excited to release an improved version of our EnCodec decoder, which allows higher quality music generation with fewer artifacts,” the company said. “We’re also releasing our pre-trained AudioGen models, which let you generate environmental sounds and sound effects like a dog barking, cars honking, or footsteps on a wooden floor. And lastly, we’re sharing all of the AudioCraft model weights and code.”

The company also plans to launch a range of AI chatbots dubbed “personas” that exhibit personalities as soon as September in an effort to boost engagement on its platforms, The Financial Times’ Hannah Murphy and Cristina Criddle reported. According to a person with knowledge of the plans, the company has explored launching one “persona” that speaks like Abraham Lincoln and another that advises on travel options in the style of a surfer.

NO NEWS IS GOOD NEWS: 

Meta Platforms blogged earlier the changes to news availability on its platforms in Canada. Meta noted that “in order to comply with the Online News Act, we have begun the process of ending news availability in Canada. These changes start today, and will be implemented for all people accessing Facebook and Instagram in Canada over the course of the next few weeks.” For Canadian news outlets this means: News links and content posted by news publishers and broadcasters in Canada will no longer be viewable by people in Canada. We are identifying news outlets based on legislative definitions and guidance from the Online News Act. For international news outlets this means: News publishers and broadcasters outside of Canada will continue to be able to post news links and content, however, that content will not be viewable by people in Canada. People in Canada will no longer be able to view or share news content on Facebook and Instagram, including news articles and audio-visual content posted by news outlets. For our international community this means: There is no change to our services for people accessing our technologies outside of Canada. “

EARNINGS RECAP: 

Shares of Pinterest (PINS) fell in after-hours trading yesterday following its second quarter earnings report. The company beat consensus estimates on EPS and revenue and noted Q2 global monthly active users, or MAUS, were up 8% to 465M. Pinterest also said that third quarter revenue growth is expected to be up in the high single digits. “In Q2, we continued to build momentum with consumers and advertisers while further accelerating our pace of innovation,” said Bill Ready, CEO of Pinterest. “Over the past year, we’ve been laser-focused on our key differentiators and we’re seeing results. Users are coming back more often and engaging more deeply, Pinterest is increasingly shoppable and actionable, and we’re delivering better and more measurable performance for our advertisers. Furthermore, due to our focus on cost efficiencies we returned to adjusted EBITDA margin expansion in Q2. Our results demonstrate that our strategy is working and we’re making the right investments to create a durable company for the long term.” Rosenblatt upgraded Pinterest. following the results. In a “choppy” advertising market “with cost-pressures galore,” Pinterest is making “enticing progress,” the form told investors in a research note. The firm says the company is laying a foundation for revenue acceleration, margin expansion and rising relevancy that can bolster the shares. Notably, Cathie Wood’s ARK Investment bought 121.4K shares of Pinterest on Monday ahead of the earnings release.

Meta Platforms also beat expectations in its Q2 report, but shares jumped nearly 8% as a result. The company’s Q3 guidance also came out ahead of analyst consensus. “We expect third quarter 2023 total revenue to be in the range of $32-34.5 billion. Our guidance assumes a foreign currency tailwind of approximately 3% to year-over-year total revenue growth in the third quarter, based on current exchange rates. We anticipate our full-year 2023 total expenses will be in the range of $88-91 billion, increased from our prior range of $86-90 billion due to legal-related expenses recorded in the second quarter of 2023. This outlook includes approximately $4 billion of restructuring costs related to facilities consolidation charges and severance and other personnel costs. We expect Reality Labs operating losses to increase year-over-year in 2023. While we are not providing a quantitative outlook beyond 2023 at this point, we expect a few factors to be drivers of total expense growth in 2024 as we continue to invest in our most compelling opportunities, including artificial intelligence and the metaverse. First, we expect higher infrastructure-related costs next year. Given our increased capital investments in recent years, we expect depreciation expenses in 2024 to increase by a larger amount than in 2023. We also expect to incur higher operating costs from running a larger infrastructure footprint. Second, we anticipate growth in payroll expenses as we evolve our workforce composition toward higher-cost technical roles. Finally, for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem. We expect our full-year 2023 capital expenditures to be in the range of $27-30 billion, lowered from our prior estimate of $30-33 billion. The reduced forecast is due to both cost savings, particularly on non-AI servers, as well as shifts in capital expenditures into 2024 from delays in projects and equipment deliveries rather than a reduction in overall investment plans. Looking ahead, while we will continue to refine our plans as we progress throughout this year, we currently expect total capital expenditures to grow in 2024, driven by our investments across both data centers and servers, particularly in support of our AI work.” Facebook MAUs were 3.03B as of June 30, up 3% year-over-year. On its second quarter earnings conference call, the social media giant noted that it plans to ride AI in the near term and the metaverse in the long term. Wells Fargo upgraded Meta Platforms. The firm cited accelerating tailwinds and “de-risked” 2024 guidance for the upgrade following last night’s Q2 results. The company’s “blowout” Q3 revenue guidance appears sustainable, the firm told investors. The firm adds that upside artificial intelligence “call options” are emerging for Meta.

X MARKS THE SPOT… FOR NOW: 

A giant, glowing X marks the San Francisco spot where Elon Musk says he plans to keep his company, the messaging platform X, formerly known as Twitter. But city officials and some residents are unhappy with the display, Reuters’ Nicholas P. Brown wrote. On Friday, the company erected an “X” logo on the roof of its Market Street headquarters, to the chagrin of neighbors who complained about intrusive lights, and San Francisco’s Department of Building Inspection which said it is investigating the structure, the author notes.

THREAD COUNT: 

Meta executives are focused on boosting retention rates on its Threads app, which lost more than half its users in the weeks after its launch, Katie Paul and Sheila Dang of Reuters reported, citing comments made by CEO Mark Zuckerberg to employees. While retention rates were better than executives had expected, they were “not perfect” Zuckerberg said, according to audio from an internal company town hall. Meta is looking to add more “retention-driving hooks” to entice users to return to the app.

GOVERNMENTAL PRESSURE:

In response to pressure from the Biden administration, Facebook removed content related to COVID-19, including posts claiming the virus was man-made, Ryan Tracy of The Wall Street Journal reported, citing an internal company communications. The emails show discussions between executives on how they managed users’ posts on the origins of the pandemic. One executive asked why the posts were being removed and another responded, “We were under pressure from the administration and others to do more… We shouldn’t have done it.”

STUDYING THE ALGORITHM: 

In four new studies with collaboration from Meta, researchers find Facebook’s algorithm is “influential” but doesn’t necessarily change beliefs, The New York Times’ Mike Isaac and Sheera Frenkel noted. Researchers from the University of Texas, New York University, Princeton and other institutions found that removing some key functions of the social platforms’ algorithms had “no measurable effects” on people’s political beliefs, and one experiment showed that people’s knowledge of political news declined when their ability to re=share posts was removed.

STAR POWER: 

Twitter CEO Linda Yaccarino has gone to Hollywood to try to win the favor of talent agencies and entertainers after Elon Musk announced the platform’s rebranding to X, Hannah Murphy and Christopher Grimes of The Financial Times reported. Yaccarino met with agents at Creative Artists Agency and United Talent Agency in Los Angeles, attempting to bring stars and influences to the platform, people familiar with the matter told the Times. Yaccarino also held meetings with Disney (DIS), one person told the Times.

MAPPED OUT: 

Overture Maps Foundation, a group formed by Meta, Microsoft (MSFT), Amazon (AMZN) and mapping company TomTom has released its first open map dataset, wrote Aisha Malik for Tech Crunch. The dataset release will allow third-party developers to “build mapping or navigation products of their own to crack the Apple (AAPL)-Google (GOOG) duopoly,” added the TC story.

ADDITIONAL ANALYST COMMENTARY: 

KeyBanc raised the firm’s price target on Sprout Social (SPT). The firm noted that its CIO Survey shows continued stability in Front Office and Social Media Management.

Barclays analyst raised the firm’s price target on Pinterest. The company is doing much better than its small mobile advertising peers but remains below overall industry growth in 2023, the firm told investors.

Argus analyst Joseph Bonner raised the firm’s price target on Meta Platforms. The company is benefiting from deep cost cuts earlier this year even though significant Reality Labs losses continue, while Threads – a Twitter competitor – it looks to take share amid Twitter’s self-inflicted wounds, the analyst tells investors in a research note. Meta Platforms has also become competitive in the generative artificial intelligence space following many years of sustained investment, and the AI business should give the company another means of optimizing performance and efficiency, Argus added.

China Renaissance downgraded Snap..

HSBC upgraded Meta Platforms. The company’s Q2 revenue was were strong and the second half of 2023 is “looking good too,” the analyst noted. The firm said the macro headwind it expected is not materializing, causing a significant reset to its advertising revenue forecasts. Both the economy and Meta’s business model “are more resilient than we were anticipating,” wrote HSBC.

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Originally Posted August 2, 2023 – #SocialStocks: Meta starts process of ending news availability in Canada