#SocialStocks: Meta to debut new Quest 3 headset in October

FCC chairwoman weighs net neutrality restoration, Snapchat + adds 5M new subscribers 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.

QUEST 3: 

Meta Platforms (META) said that the Meta Quest 3 mixed reality headset hits shelves October 10, starting at $499.99 USD for the 128GB version and $649.99 USD for those who want a larger storage capacity at 512GB. “Over 100 new and upgraded titles are coming to Meta Quest 3 through the end of 2023,” the company said. “Over half of those are brand-new apps, and upgrades or MR features are coming to another 50+ titles currently on the Meta Quest Store. And because Meta Quest 3 is backwards-compatible with Meta Quest 2, you get access to the world’s best library of 500+ immersive games and experiences on day one, so there’s something for everyone to discover. Meta Quest 3 delivers the most immersive and interactive ways to do what you love-whether that’s gaming, entertainment, fitness and wellness, travel, design, collaborating with coworkers, or simply socializing. And with Xbox Cloud Gaming (MSFT) coming to Meta Quest in December, you’ll be able to play Halo Infinite, Minecraft Legends, Forza Horizon 5, and hundreds of other high-quality Xbox games-all on a massive 2D screen you can take with you anywhere.”

AI CHIP HEAD STEPS DOWN: 

Alexis Black Bjorlin, vice president of infrastructure at Meta, is stepping down from her position at the Facebook parent at the end of the month, Reuters’ Katie Paul and Stephen Nellis reported, citing two sources familiar with the matter. Bjorlin led a team tasked with designing a custom chip to handle a range of artificial intelligence work, the authors note. The executive is leaving her position at the end of September but is not immediately leaving the company, the authors said.

STRICTLY BUSINESS: 

Snap (SNAP) is closing a division focused on making augmented reality services for businesses, pulling the plug on its latest attempt to diversify the ad-dependent company, Bloomberg’s Alex Barinka wrote. The ARES unit, short for augmented reality for enterprise services, was just announced in March, the author noted. The idea was to let retailers adapt Snap’s AR technology for their own websites. But the company ultimately realized that the cost and complexity of the endeavor was too great, according to a memo from CEO Evan Spiegel that was reviewed by Bloomberg and confirmed by a Snap spokesperson.

LARGE LABGUAGE MODEL PACT: 

NET) announced a partnership with Meta to make the Llama 2 open source large language model, or LLM, available to developers building AI applications on Cloudflare’s developer platform, Workers. Until recently, the only way to have access to an LLM was through calls to proprietary models. Training LLMs is a serious investment – in time, computing, and financial resources – and thus not something that’s accessible to most developers. Meta’s release of Llama 2, a publicly available LLM, has presented a major shift, allowing developers to run and deploy their own LLMs. However, this still requires access to, and managing, the infrastructure to run the LLM. Now, more than a million developers already building on Cloudflare have access to a leading LLM to enrich their applications. Cloudflare’s hyper-distributed edge network will enable developers anywhere to build applications with Llama 2. And with Cloudflare’s Data Localization Suite, they will be able to do this while controlling where their data is handled. Cloudflare’s privacy-first approach to application development can help companies earn trust with their customers by ensuring data used for inference is not used for training or improving the LLM.

NET NEUTRALITY: 

Chairwoman Rosenworcel shared with her colleagues a proposal that would begin the process of re-establishing the FCC’s oversight over broadband and restoring uniform, nationwide net neutrality rules, the FCC announced.

SEE NO EVIL, HEAR NO EVIL, SPEAK NO EVIL: 

OpenAI posted updates to ChatGPT on its blog that include new voice and image capabilities. The group noted in part: “We are beginning to roll out new voice and image capabilities in ChatGPT. They offer a new, more intuitive type of interface by allowing you to have a voice conversation or show ChatGPT what you’re talking about. Voice and image give you more ways to use ChatGPT in your life. Snap a picture of a landmark while traveling and have a live conversation about what’s interesting about it. When you’re home, snap pictures of your fridge and pantry to figure out what’s for dinner, and ask follow up questions for a step by step recipe. After dinner, help your child with a math problem by taking a photo, circling the problem set, and having it share hints with both of you. We’re rolling out voice and images in ChatGPT to Plus and Enterprise users over the next two weeks. Voice is coming on iOS and Android and images will be available on all platforms. You can now use voice to engage in a back-and-forth conversation with your assistant. Speak with it on the go, request a bedtime story for your family, or settle a dinner table debate.”

YOUTH MOVEMENT: 

Meta Platforms is planning to release artificial intelligence chatbots as soon as this week with distinct personalities across its social-media apps as a way to attract young users, The Wall Street Journal’s Salvador Rodriguez, Deepa Seetharaman and Aaron Tilley reported, citing people familiar with the matter. These generative AI bots are being tested internally by employees, and the company is expected to announce the first of these AI agents at the Meta Connect conference, which starts Wednesday. The bots are meant to be used as a means to drive engagement with users, although some of them might also have productivity-related skills such as the ability to help with coding or other tasks, the authors note.

SNAPCHAT+: 

Snap has gained more than 5M subscribers for its subscription product Snapchat+, according to Alex Barinka of Bloomberg. Snapchat+ is part of a broader strategy shift the company began last year to help generate moneymaking opportunities. This move appears to be successful, with the latest subscriber number jumping from 3M disclosed in April.

INSIDE SALE: 

In a regulatory filing, Zoom Video (ZM) disclosed that its COO Aparna Bawa 13.3K shares of common stock on September 19 in a total transaction size of $920K. In a separate filing, Snap disclosed that its COO Jerry Hunter sold 124.7K shares of common stock on September 18 in a $1.1M deal.

ANALYST COMMENTARY: 

Guggenheim raised the firm’s price target on Meta Platforms and maintained a Buy rating on the shares. The firm, which believes that advertisers are prioritizing the “most measurable, efficient, and proven” spending on advertising, has updated its Meta and Alphabet (GOOGL) models to reflect increased confidence in both companies’ ability to further accelerate revenue growth in the second half of 2023. The firm, which notes its estimates are “modestly ahead of consensus 2023 total revenue at both companies,” maintains Buy ratings on both shares of Google parent Alphabet.

HSBC initiated coverage of Pinterest with a Buy rating. The company’s new CEO moved away from competing head on in the short-form videos space, enhanced operations and margins, and built upon Pinterest’s reputation for a positive user environment to better attract advertisers, the analyst told investors in a research note. The firm believes the company has the right management team in place.

In addition, HSBC analyst initiated coverage of Snap with a Reduce rating. Snap has been struggling with an adverse advertising industry climate and a social media landscape that is moving in the direction of the creator driven short-form media content popularized by TikTok, the firm told investors. The analyst believes the “growing gulf” in content, user engagement, advertising solutions, and financial resources between the leading players and Snap likely precludes a successful turnaround of the business.

Roth MKM reiterated a Neutral rating on Pinterest (PINS) after its Investor Day presentation. The management’s tone was constructive and balanced, with optimistic long-term outlook that was partially offset by near-term macro and product headwinds, the analyst tells investors in a research note. Roth MKM adds that it remains neutral on shares as the stock currently trades at a premium vs. mega caps despite a lower near-term growth rate vs. peers.

Loop Capital kept a Buy rating on Meta Platforms ahead of the company’s annual Connect event next week. The official launch of the Quest 3 will be a highlight, though an update and possible launch of Meta’s first consumer-facing generative AI solutions are also possible, the analyst noted. Augmented reality is set to become a bigger focus of the company, providing a bridge to metaverse content and participation through AR apps accessible on over 5B smartphones in use today, the firm added.

Citi analyst Ronald Josey opened a “90-day positive catalyst watch” on Meta Platforms in advance of Meta Connect 2023. The analyst has a Buy rating on the shares. The firm expects to hear more details around Meta’s generative artificial intelligence plans and also expects the company to report strong Q3 earnings. Citi believes Meta is taking share of the broader online advertising market. Reels ad loads reached 19% quarter-to-date versus 17% in Q2 per Citi’s tracking, while the online advertising environment is improving, the analyst tells investors in a research note. The firm believes there remains upside as engagement grows and Reels’ Lo-Fi ad environment attracts more advertisers. Meta remains Citi’s top pick across the internet sector and the firm would be buyers on any material pullback in shares.

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Originally Posted September 27, 2023 – #SocialStocks: Meta to debut new Quest 3 headset in October