Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
FACEBOOK VS APPLE: Apple's (AAPL) Tim Cook and Facebook's (FB) Mark Zuckerberg had an unpleasant meeting back in 2019, The New York Times' Mike Isaac and Jack Nicas reported. Cook told Zuckerberg that Facebook should delete all data it collected after the Cambridge Analytica scandal, according to the report, which adds that Zuckerberg was "stunned" by the suggestion, which came about during a discussion on user privacy. Two years later, Zuckerberg and Cook’s squabble has reportedly erupted into an all-out war. Apple just released iOS 14.5 on Monday much to the chagrin of Facebook and others. Consequently, nine industry associations, representing companies including Facebook and Axel Springer, have filed a complaint with Germany's competition regulator, accusing Apple of antitrust abuse, The Financial Times' Javier Espinoza reported. iOS 14.5 will force all apps to ask users if they wish to be tracked for advertising purposes. The German complaint predicted a 60% decline in advertising revenues for app developers, as the update will make it harder for third parties to gather the data they need to place ads. Apple told the New York Times, “We simply believe users should have the choice over the data that is being collected about them and how it’s used.” A Facebook spokesperson in response said, "“Free, ad-supported services have been essential to the growth and vitality of the internet, but Apple is trying to rewrite the rules in a way that benefits them and holds back everyone else.” While the two CEOs Cook and Zuckerberg were once seen as friendly, they find themselves on the opposite sides more frequently now. “We increasingly see Apple as one of our biggest competitors,” Zuckerberg said in an earnings call this year. On the other hand, Cook took a more indifferent approach. “I’m not focused on Facebook,” he told The Times earlier this month. “I think that we compete in some things. But no, if I’m asked who our biggest competitors are, they would not be listed.”
EXECUTIVES TESTIFY ON ALGORITHMS: Yesterday, executives from Facebook, Twitter (TWTR) and Google's (GOOG, GOOGL) YouTube testified in a virtual hearing by The Subcommittee on Privacy, Technology and the Law holds. The hearing was entitled, "Algorithms and Amplification: How Social Media Platforms' Design Choices Shape Our Discourse and Our Minds" with VP Bickert of Facebook, head of U.S. public privacy Culbertson of Twitter and director of government affairs Veitch of YouTube. Senator Chris Coons, chair of the subcommittee hosting the hearing, told Politico last month that he plans to make social media and algorithmic accountability a top issue for his panel this Congress. “Social media platforms use algorithms that shape what billions of people read, watch and think every day, but we know very little about how these systems operate and how they’re affecting our society," Coons told Politico. "Increasingly, we’re hearing that these algorithms are amplifying misinformation, feeding political polarization and making us more distracted and isolated.”
SNAP M&A: Snap (SNAP) has confirmed that it acquired Pixel8earth, a company developing 3D mapping technology based on crowdsourced data, during the last quarter for $7.6M, reported TechCrunch's Ingrid Lunden. Pixel8earth's four employees are joining Snap to build out map tools that will work with Snap's location-based augmented reality experiences, according to the report. This followed the SEC disclosure that Snap paid $124M for Fit Analytics in the same quarter. Lunden noted that while it is unclear if Snap will keep Pixel8earth running, or if it will integrate its technology and further develop Snap Map, but she believes it’s most likely a talent acquisition citing the $7.6M price tag. More information on hw the two acquisitions fit will likely be given at the Snap Partner Conference in May.
EARNINGS RECAP/PREVIEW: Last Thursday Snap reported Q1 earnings, beating both top- and bottom-line expectations. The company reported Q1daily active users of 280M, up 22% year-over-year. Q1 average revenue per users, or ARPU was $2.74, up 36%. In the release, Snap noted that in March, over 125M Snapchatters used Spotlight, the company's newest platform. The company also guided Q2 revenue of $820-$840M, which is in-line with Street estimates of $826.11M. Snap CFO Derek Anderson said: "As we look forward to Q2, we estimate that DAU will grow at a rate consistent with the prior quarter, or approximately 22% year-over-year, to reach 290M in Q2. On the monetization side, we are cautiously optimistic that the operating environment will continue to improve." Snap shares were up 3% following the earnings beat and Q2 guidance. Barclays analyst Ross Sandler raised the firm's price target on Snap to $75 from $66 and maintained an Overweight rating on the shares. The company posted revenue and EBITDA that were 4% and $55M above consensus, and guided broadly in-line with "lofty buyside expectations" for Q2, Sandler told investors in a research note. He believes Snap remains in the "sweet spot of generating fairly significant revenue growth rates, while optimizing the ad insertion and reducing ad load." Sandler thinks this can persist for a few more quarters.
Yesterday, Pinterest (PINS) reported its Q1 earnings. EPS of (3c) was below analyst consensus of 7c, but the company's Q1 revenue of $485.23M came in above estimates of $473.66M. The company reported Q1 global MAUs up 30% year-over-year to 478M. "Whether it's recipe ideas during the pandemic or dream vacation planning for the future, I'm proud that we now help 478 million people every month find inspiration to create a life they love," said Ben Silbermann, CEO and co-founder, Pinterest. "This quarter, we continued strong growth internationally, including our recent launch of advertising in Brazil, and made significant progress with shopping, making it easier for people to discover and buy products they find on Pinterest." "Q1 results were strong, building off the momentum of 2020. Continued rapid growth of our international business and increased adoption from medium and small advertisers drove 78% year-over-year revenue growth," said Todd Morgenfeld, CFO and Head of Business Operations, Pinterest. "While we continue to navigate COVID-19 uncertainty, we plan to stay focused on driving investments that deliver an inspirational Pinner experience and measurable advertiser value." Pinterest said it expects Q2 revenue to be up 105%. "We continue to navigate uncertainty given the ongoing COVID-19 pandemic and other factors," the company said. "Our current expectation is that Q2 revenue will grow around 105% year over year. In Q2, we expect global MAUs to grow in the mid-teens and US MAUs to be around flat on a year-over-year percentage basis. Finally, we expect sequential operating expense growth to accelerate in Q2 as we continue to ramp investments in our long-term initiatives and growth drivers." Pinterest shares were down as much as 10% after the Q1 report. Wedbush analyst Ygal Arounian lowered the firm's price target on Pinterest to $91 from $100 and reiterated an Outperform rating on the shares. The analyst noted Pinterest reported "strong" 1Q results with top-line and EBITDA ahead of expectations and issued Q2 revenue guidance well ahead of the Street. However, user growth disappointed, which pressured shares after the print, he adds. Arounian believes the concerns around user growth stalling are valid, but believes management has reset the bar conservatively and he has expected the pull forward in users from COVID to slow user growth on the other side. IN a similar vein, Deutsche Bank analyst Lloyd Walmsley recommended using the post-earnings selloff in Pinterest as a buying opportunity.
Facebook is set to report Q1 earnings today along with Apple. Stifel analyst John Egbert raised the firm's price target on Facebook to $350 from $340 and kept a Buy rating on the shares ahead of the company's scheduled Q1 report. Third-party read-throughs point to continued momentum in demand for Facebook ads during Q1, which is normally a seasonally-slower quarter, Egbert told investors in a research note. His price target bump reflects what he sees as "a slightly brighter outlook for FY21 and beyond," added the analyst. Similarly, Credit Suisse analyst Stephen Ju raised the firm's price target on Facebook to $371 from $330. He increased his 2021/2022 estimates on positive channel checks and improving ad trends.
Lastly, Truist analyst Youssef Squali believes Twitter's Q1 results will be "strong," in line or slightly ahead of consensus estimates, driven by sustained momentum out of Q4, a richer set of offerings for both users and advertisers, and the delay in IDFA deprecation. Positive conversations with marketers and read through from Snap's results support his thesis, Squali contended. The analyst also expects the gradual reopening, easy year-over-year comps and growing traction with DR advertisers to drive revenue and margin improvement in 2021. The strategic decision to rebuild its core ad server and MAP, and revamp its tech stack are finally starting to pay off, he argues. The analyst has a Buy rating and a price target of $74 on the shares.
Apple
-0.13 (-0.10%)
Ticker changed to META
+5.015 (+1.65%)
+0.19 (+0.29%)
Alphabet
+86.98 (+3.77%)
Alphabet
+83.95 (+3.66%)
Snap
+1 (+1.65%)
-10.745 (-13.87%)