#SocialStocks: Trump Media tumbles after share sale and streaming announcement

UK seeks more parental control, Sprout Social to welcome new CEO 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.

UPPING PARENTAL CONTROLS: 

The U.K. plans to hold talks this month with Apple (AAPL), Meta (META), Alphabet (GOOGL) and others to push a voluntary charter granting parents more control of social media use by young teens, Bloomberg’s Ellen Milligan reported. According to people familiar with the matter, ministers want to launch a consultation later this month to gauge ways of limiting the potential harm to children caused by social media, and the proposed voluntary charter may involve tech firms agreeing to alert parents when their children are repeatedly looking up disturbing content.

TRUTH SOCIAL STREAM: 

Trump Media’s (DJT) Truth Social announced that after six months of testing on its Web and iOS platforms, the company has finished the research and development phase of its new live TV streaming platform and will begin scaling up its own content delivery network. TMTG plans to roll out its streaming content in three phases: Phase 1: Introduce Truth Social’s CDN for streaming live TV to the Truth Social app for Android, iOS, and Web. Phase 2: Release stand-alone Truth Social over-the-top streaming apps for phones, tablets, and other devices. Phase 3: Release Truth Social streaming apps for home TV. The streaming content is expected to focus on live TV including news networks, religious channels, family-friendly content including films and documentaries; and other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services.

THE QUEST FOR EDUCATION: 

Later this year Meta will launch a new education product for Quest devices, Meta’s Nick Clegg, president, Global Affairs, announced on Monday. It will allow teachers, trainers and administrators to access a range of education-specific apps and features, and make it possible for them to manage multiple Quest devices at once. The new product is the result of extensive consultation and collaboration with educators, researchers and third-party developers working in the education space around the world, Clegg said.

FAN COMMUNICATION OUTSOURCED: 

Meta’s Instagram is pitching to influencers a program that relies on artificial intelligence to interact with fans, Sapna Maheshwari and Mike Isaac of The New York Times wrote. The program would allow influencers to chat with fans through direct messages on Instagram and potentially through comments in the future, five people briefed on the matter said.

OFF THE HOOK: 

Meta CEO Mark Zuckerberg won a bid to avoid personal liability in about two dozen lawsuits accusing Meta and other companies of addicting children to their products, Bloomberg’s Rachel Graf noted. U.S. District Judge Yvonne Gonzalez Rogers, who is overseeing the cases, sided with the Meta CEO in a ruling issued Monday, dismissing Zuckerberg as an individual defendant without affecting claims against Meta as a company. The judge ruled that Zuckerberg cannot be held liable just because he’s the public face of Meta.

LOOSE THREADS: 

Meta plans to temporarily shut down Threads in Turkey from April 29 to comply with a Turkish Competition Authority interim order prohibiting data sharing between Threads and Instagram. There is no impact to Facebook, Instagram, WhatsApp or any other Meta services in Turkey, or Threads in other countries, Meta said.

SUCCESSION: 

Sprout Social (SPT) announced that President Ryan Barretto will become Sprout Social’s CEO, effective October 1. Co-founder and current CEO Justyn Howard will step into the role of executive chair. Barretto joined Sprout Social in 2016 as SVP of global sales & success. In December 2020, he was promoted to president and was responsible for GTM operations including marketing, sales, customer success, and partnerships. During his nearly eight-year tenure at the company, Barretto has served as a member of the executive team, helping scale the business from $30M ARR to more than $385M exiting 2023. Over the next six months, Howard will work closely with Barretto to transition CEO responsibilities, ensuring a transition of leadership. Then, as executive chair, Howard will continue to work alongside Barretto, and Sprout’s board of directors and executive leadership team.

PARENTAL GUIDANCE: 

Some former employees of TikTok employees say the social media service worked closely with ByteDance, its China-based parent, despite claims of independence, Fortune’s Alexandra Sterlicht reported.

SHARE SALE: 

Trump Media shares sunk after the company filed to sell shares and warrants in a regulatory filing. Trump Media registered up to 21.5M shares for potential sale, including common stock and warrants, and up to 146.1M shares for potential sale by selling shareholders, including 114.8M shares held by Donald Trump, according to the regulatory filing. Shares of Trump Media were down 18%, or $5.79, to $26.80 in premarket trading on Monday.

MEMES FOR NEWS: 

Canada has become ground zero for Facebook’s battle with governments that have enacted or are considering laws that force internet giants to pay media companies for links to news published on their platforms. Facebook has blocked news sharing in Canada rather than pay, saying news holds no economic value to its business, Reuters’ Byron Kaye wrote. The blocking of news links has led to profound and disturbing changes in the way Canadian Facebook users engage with information about politics, two unpublished studies shared with Reuters found. “The news being talked about in political groups is being replaced by memes,” said Taylor Owen, founding director of McGill University’s Center for Media, Technology and Democracy, who worked on one of the studies. “The ambient presence of journalism and true information in our feeds, the signals of reliability that were there, that’s gone.” The lack of news on the platform and increased user engagement with opinion and non-verified content has the potential to undermine political discourse, particularly in election years, the studies’ researchers say.

SHIELD YOUR EYES: 

Instagram is taking steps to automatically detect and blur nude photos in its direct-messaging service to help protect teens, Julie Jargon of The Wall Street Journal noted. Users who receive nude images via direct messages will see a pop-up on how to block the sender or report the chat, and a note reminding the receiver to not feel pressure to respond. Meanwhile, the sender will be advised to be cautious and be sent a reminder they can unsend the pic. The feature will be tested in the coming weeks and is expected to roll out globally within the next few months.

ANALYST COMMENTARY: 

Morgan Stanley lowered the firm’s price target on Sprout Social and maintained an Equal Weight rating on the shares. The firm’s channel conversations picked up a stable to slightly improving environment across the Software-as-a-Service group and demand stabilization, along with lower expectations, makes the firm “constructive on FY24 setups,” the analyst told investors in a group preview note.

Truist increased its price target on Meta and reiterated a Buy rating on the stock. The firm is boosting its FY24 revenue outlook for the company to $158.7B from $156.9B to reflect improving monetization after two years of compression, higher impression volume and a strengthened “must-buy status” within the digital ad ecosystem amid ongoing cookie deprecation and a volatile macro environment, the analyst said. Meta’s significant AI investments are also yielding better ranking and recommendation results for users and advertisers, the firm added.

Stifel lowered its price target on Snap (SNAP) and backed a Hold rating. The firm also boosted its price target on Meta Platforms and kept a Buy rating on the shares. Sentiment for the U.S. Internet group has been mixed since the start of 2024 and the firm’s thoughts at the start of Q1 earnings are “largely unchanged” that the advertising environment continues to improve, e-commerce continues to “hang in there,” and subscription names “remain a mixed bag,” the analyst told investors.

Citi raised the firm’s price target on Meta Platforms and reprised a Buy rating on the shares. The firm’s Instagram Reels advertising load tracker in Q1 expanded by 90 basis points quarter-over-quarter to 20% as engagement continues to improve. With Meta’s newer ad innovations, a new artificial intelligence video architecture, and greater overall advertiser adoption, advertiser demand for Reels continues to improve, the analyst tells investors in a research note. Meta remains Citi’s top pick and it increased estimates ahead of the Q1 report.

Piper Sandler elevated its price target on Meta and reenacted an Overweight rating on the shares. The firm continues to see upside to numbers and remains a buyer despite the strong run in the stock. Piper forecasts $35.7B in Q1 revenue and $19.8B in EBITDA. Its checks were again positive, driven by Advantage+ and specifically Shopping. The firm sees impressions roughly in-line with Q4 2023 pricing roughly flat year-over-year.

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Originally Posted April 17, 2024 – #SocialStocks: Trump Media tumbles after share sale and streaming announcement