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#SocialStocks: Meta to Report Q1 Earnings

Posted April 27, 2023 at 10:30 am
Andrew Perez
The Fly

Snap’s my AI receives bad publicity, Meta axes 10% of U.K. headcount 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.

META EARNINGS PREVIEW: 

Meta Platforms (META) is set to report first quarter results after the bell today. In Q4, Meta noted earnings of $1.76 per share, missing consensus at that time of $2.22, on revenue of $32.17B that beat the $31.53B consensus forecast. The company expects second quarter revenue to be in a range of $26B-$28.5B, bracketing the then-current consensus of $27.14B. Mark Zuckerberg, Meta founder and CEO, said at the time: “Facebook just reached the milestone of 2 billion daily actives. The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.” The company also cut its FY23 total expenses view to $89B-$95B from $94B-$100B and announced a $40B increase in its share repurchase authorization. 

CHIP OFF THE OLD BLOCK: 

Meta Platforms had hired a chip executive from Microsoft (MSFT) to oversee its work developing custom chips for hardware devices, The Information’s Sylvia Varnham O’Regan reported, citing people familiar with the matter. The hire comes as Meta is evaluating the company’s silicon strategy, a move that could spell more layoffs, the author says. Jean Boufarhat, who currently serves as corporate vice president of silicon engineering at Microsoft, is joining to run Meta’s Facebook Agile Silicon Team, or FAST.

THANKS, BUT NO THANKS: 

Snapchat’s (SNAP) recently released AI chatbot, known as MY AI, has been getting mostly negative user reviews, TechCrunch’s Sarah Perez reported. Over the past week, the app’s average U.S. App Store review was 1.67%, with 75% of reviews being one star, the author says, citing data from Sensor Tower. For comparison, across 1Q23, Snapchat’s average review on the same store was 3.05 with just 35% one-star ratings, the author noted.

ARBORETUM: 

Sprout Social (SPT) announced the launch of The Arboretum, a community platform for social and marketing professionals to connect with peers, learn new skills, and exchange actionable advice. The community is open to all marketers at no cost. Members have access to networking and educational opportunities, and the ability to connect with like-minded peers-from practitioners to C-suite executives. “Mentorship has been one of the most valuable resources in advancing my career, and the impact of having access to a community of industry experts cannot be understated,” said Jamie Gilpin, CMO, Sprout Social. “Our collective knowledge is a powerful asset that will help marketers across the globe inform org-wide business strategies while leveling up their skills and careers. We’re excited to see how the community will turn shared insights into action.”

OUT OF THE BLUE: 

Elon Musk has come through with his promise of removing the blue checkmarks on Twitter (TWTR) from “legacy verified accounts,” reported The Verge’s Jon Porter. “Musk has been vocal about his dislike for the legacy verification system, calling it “bullshit,” “corrupt,” and a “lords & peasants system,” noted The Verge story.

LAYOFFS: 

Meta intends to cut over 10% of its U.K. headcount and ditch Instagram’s new hub in London, the Financial Times’ Cristina Criddle noted. An internal document sent to employees this week said that no fewer than 687 positions would be eliminated, mainly in London, with yet more among its U.K. workforce of roughly 5,000 at risk of redundancy, the author said. 

Meta CEO Mark Zuckerberg told staff this week that he isn’t ruling out future layoffs and added that he doesn’t anticipate the company to hire as quickly as it did before job cuts that began in late 2022, the Wall Street Journal’s Salvador Rodriguez, Jeff Horwitz, and Sam Schechner reported. Zuckerberg addressed workers in a virtual Q&A session just one day after the social media giant completed its latest round of workforce reductions, the authors said. The CEO said that roughly 4,000 employees were affected by the latest cuts, the authors note.

WHAT TIME IS IT?:  

Soon after Microsoft announced it was removing Twitter from its business-to-business advertising plan on Wednesday, Twitter CEO Elon Musk threatened to sue the tech giant, Forbes said. Twitter chief musk tweeted “lawsuit time,” accusing Microsoft of “illegally” using Twitter data for training, noted the story,.

ACROSS THE POND: 

Instagram is planning to move most of its staff from London to New York as part of a widespread restructuring effort, Cristina Criddle and Hannah Murphy of The Financial Times reported. Instagram has been building a hub in the U.K over the past few months, but is now asking workers to move to the U.S., three people aware of the plans told the Times. This includes the platform’s head Adam Mosseri, who had moved from California to London less than eight months ago.

CSA DEEMS META UNSAFE: 

The Virtual Global Taskforce or VGT, is an international alliance of 15 law enforcement agencies to tackle the threat of child sexual abuse, CSA. the alliance said in part: “The VGT first issued its first position statement on end-to-end encryption or E2EE, in 2021. This statement highlighted the devastating impact E2EE can have on law enforcement’s ability to identify, pursue and prosecute offenders, when implemented in a way that affects the detection of CSA on industry platforms. It is important to update the VGT position on E2EE in the context of impending design choices by industry. As outlined in our previous statement, there is no doubt that encryption plays an important role in safeguarding privacy, however this must be balanced with the importance of safeguarding children online…The announced implementation of E2EE on META platforms Instagram and Facebook is an example of a purposeful design choice that degrades safety systems and weakens the ability to keep child users safe. META is currently the leading reporter of detected child sexual abuse to NCMEC. The VGT has not yet seen any indication from META that any new safety systems implemented post-E2EE will effectively match or improve their current detection methods…The VGT calls for all industry partners to fully appreciate the impact of implementing system design decisions that result in blindfolding themselves to CSA occurring on their platforms, or reduces their capacity to identify CSA and keep children safe. It is time to confront these concerns and make tangible steps towards possible solutions that we know exist” said the alliance in part.

ANALYST COMMENTARY: 

Roth MKM kept a Neutral rating on Snap (SNAP) ahead of its Q1 results on Thursday. The company has demonstrated progress in AR initiatives and maintained steady user growth, but sentiment toward the stock remains negative due to unclear traction with Direct Response, Spotlight monetization and ongoing engagement mix-shift away from high Average Revenue Per User surfaces such as Stories, the analyst tells investors in a research note.

Needham reiterated a Hold rating on Zoom Video (ZM), saying the company will be a likely beneficiary of Microsoft reportedly unbundling Teams from Office. The firm said that Teams has become a dominant enterprise collaboration platform, making the unbundling move increase its confidence that Zoom can achieve consensus growth of 5% in its fiscal 2025. Needham added that it still views the coming AI capabilities and seamless compatibility with Office as a major advantage for Microsoft.

Morgan Stanley sees multiple new AI-driven capabilities within online advertising and generative content creation that the firm believes will enable Meta to drive stronger engagement, time spent, ad unit conversion, advertiser ROI, and ultimately monetization across core Facebook and Instagram. The firm, which sees AI-driven behavior change leading to durable multi-year online ad growth.

Originally Posted April 26, 2023 – #SocialStocks: Meta to report Q1 earnings

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