Google antitrust ruling and Nvidia chip delay could have major Big tech implications, and other notable stories from this week Welcome to "StockTok," The Fly's weekly recap of Wall Street's reactions to social media stock news.
REACHING NEW HORIZONS: Meta Platforms (META) is in talks to license its Horizon virtual reality software to Indian technology company Jio, three people with knowledge of the matter told The Information's Sylvia Varnham O'Regan, Wayne Ma and Amir Efrati. The talks, which may not lead to a deal, center on Meta providing its Horizon software to power a VR device Jio would develop in the latest sign of how Meta is trying to extend its influence in VR and augmented reality beyond its own devices, according to The Information.
C-SUITE: Sprout Social (SPT) announced the appointment of Mike Wolff to chief revenue officer, effective September 2. As chief revenue officer, Wolff will oversee Sprout's global sales, success and partnerships organization. He will focus on the continued global growth and expansion of Sprout's innovative offerings. He recently served as chief revenue officer of Salesforce.org (CRM).
TRUMP TV: Trump Media & Technology Group (DJT) has launched linear TV streaming on iOS devices. In order to access TV streaming, iOS users will need to update the Truth Social app through the Apple App Store unless their devices are set to automatically download updates. Then, users can access TV streaming on the Truth Social app by clicking on a Truth+ streaming icon shaped like a TV. Users can view streaming content as stand-alone channels or in a separate picture-in-picture window while scrolling on the Truth Social platform. The launch is powered by TMTG's new, custom-built content delivery network.
LANDMARK ANTITRUST RULING: Judge Amit Mehta of U.S. District Court for the District of Columbia found Google (GOOGL) violated antitrust laws by stifling rivals in internet searches to protect its monopoly, Steve Lohr of The New York Times reported. This loss could have major ripple effects, with the ruling likely to weigh on cases against other companies accused of violating antitrust laws, such as Amazon (AMZN), Meta, and Apple (AAPL). Further, this ruling will likely impact a second lawsuit against Google over its ad technology, which is set to go on trial next month.
ZOOM DOCS: Zoom Video (ZM), announced the rollout of Zoom Docs, its AI-first collaborative docs solution, starting today. "Zoom Docs is our first Zoom Workplace product with generative AI built in from the ground up; it effortlessly transforms information from Zoom Meetings into actionable documents and knowledge bases, so teams can stay focused on meaningful work," said Smita Hashim, chief product officer at Zoom. "Zoom Docs is included at no additional cost with Zoom Workplace paid licenses, creating even more value for our customers. With AI Companion available every step of the way, Zoom Docs is purpose-built to empower people to 'work happy' and give them more time back in their day."
CELEBRITY-VOICED AI: Meta is in talks with Awkwafina, Judi Dench, Keegan-Michael Key, and other actors and influencers for the right to incorporate their voices into a digital assistant product called MetaAI, Mike Isaac and Nicole Sperling of NYT wrote. All of Hollywood's top talent agents are involved in negotiations with the company. It is not yet clear which actors and influences, if any, may sign on to the project, the sources added.
CHIP DELAY: Nvidia's (NVDA) upcoming artificial intelligence chips will be delayed by three months or more due to design flaws, a snafu that could affect customers such as Meta, Google and Microsoft (MSFT) that have collectively ordered tens of billions of dollars worth of chips, The Information's Qianer Liu and Anissa Gardizy wrote, citing two people familiar with the matter. Nvidia this week told Microsoft and another large cloud provider about a delay involving the most AI chip in its new Blackwell series of chips, according to a Microsoft employee and another person familiar with the matter.
SETTING REGULATORY BOUNDARIES: UK tech secretary Peter Kyle has reassured tech companies its long-awaited AI bill will be narrowly focused on the most advanced models and will not become a broad bill that regulates the new industry, Anna Gross and George Parker of The Financial Times said. Kyle said the bill expected to be released later this year will focus on existing voluntary agreements between companies and turning the UK's AI Safety Institute into a government body, people briefed on discussions told the Times.
TURKEY ALLEGES CENSORSHIP: Turkey has blocked access to social media site Instagram after accusing the social media service of censoring posts on the death of Hamas political leader Ismail Haniyeh, The Financial Times' Adam Samson reported. Facebook was not subject to a block, according to the Information and Communication Technologies Authority's website. Fahrettin Altun, Turkey's head of communications and a top adviser to President Recep Tayyip Erdogan, on Wednesday claimed Instagram was "actively preventing people from posting messages of condolences for the passing of Hamas leader Haniyeh" following his death this week.
PINTERESTED: Cathie Wood's ARK Investment bought 398.2K shares of Pinterest last week
EARNINGS RECAP: Despite besting last year's totals in EPS and revenue, and providing better than expected Q3 guidance, shares of Reddit (RDDT) were down around 5% on Tuesday following its second quarter report. Daily active uniques increased 51% year-over-year to 91.2M. Weekly active uniques increased 57% year-over-year to 342.3M. "We had a strong quarter across the board and more people are visiting Reddit than ever before," said Steve Huffman, Co-Founder and CEO of Reddit. "Our work to improve the platform is driving results and we are well positioned to continue to grow and deliver on our long term mission." Piper Sandler raised the firm's price target on Reddit to $70 from $65 and kept an Overweight rating on the shares. The firm noted Reddit delivered another quarter of strong results with revenues 13% above its expectations and EBITDA margins better. User growth looks sustainably stronger at least through year-end, while the nascent ads business gains scale, Piper said, adding that data licensing is also ramping. On the other hand, Roth MKM decreased its price target on Reddit to $66 from $67 and reiterated a Buy rating on the shares. The company delivered an emphatic beat-and-raise earnings report with upside to the firm's recently raised estimates, while accelerating user growth, sturdy foundations from current AI data licensing deals, and a myriad of new products in testing were sources of positive surprise, the analyst told investors in a research note.
Sprout Social reported Q2 results, Q3 and FY24 guidance in line with analyst consensus. "We're pleased to share that we're tracking ahead of the plan outlined last quarter," said Ryan Barretto, President and incoming CEO. "Through the dedication and hard work of our teams and strong customer success, we further extended our product leadership, continued to improve our competitive position, and generated record pipeline. We're building momentum for a stronger second half of the year." Baird elevated the firm's price target on Sprout to $40 from $38 and maintained a Neutral rating on the shares. The firm said they reported a solid quarter versus fears of another cut. Company reiterated FY24 guidance, although investors may nitpick on Tagger strength being the driver.
Snap's results in the second quarter and forward-looking guidance were also largely in line with expectations. The company noted Q2 daily active users grew 9% to 432M. Also Snap lowered its FY24 adjusted operating expenses outlook. "Our community grew to reach more than 850 million monthly active users in Q2, with more than 11 million Snapchat+ subscribers," said Evan Spiegel, CEO. "We continued to scale our advertising platform with active advertisers more than doubling year-over-year. We are looking forward to hosting our upcoming Snap Partner Summit on September 17th, where we will announce new updates to our service." The social media company highlighted a double-digit gain in AR Lenses use. The company said, "Augmented reality continues to inspire communication, and Snapchatters play with AR Lenses billions of times per day on average. In Q2, the number of Snapchatters sharing AR Lens experiences with their friends increased 12% year-over-year, driven by the popularity of innovative generative AI Lenses and improved ranking and optimization of our AR experiences." Shares of Snap plunged over 16% following the report. LightShed Partners downgraded Snap to Neutral from Buy, telling investors in the title of the firm's note "we have been wrong." Additionally, HSBC analyst Mohammed Khallouf downgraded Snap to Hold from Buy with an $11 price target. Loop Capital cut the firm's price target on Snap to $14 from $20 and affirmed a Buy rating on the shares. The company reported disappointing Q2 results, with direct response advertising revenue in line with forecast but brand advertising revenue collapsing from 12% growth in Q1 to a 1% decline in Q2, the analyst noted. The firm is also reducing its assumed expected-sales multiple on the stock to 4-times from 5-times, Loop added.
Finally, Meta came out ahead of analyst consensus in its Q2 release. Mark Zuckerberg, Meta founder and CEO, said: "We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year. We've released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we're driving good growth across our apps." The social media giant made Ai a prominent part of its quarterly report and acknowledged the expenses that will come with it. Consequently, Meta raised its capital expenditure outlook. "We anticipate our full-year 2024 capital expenditures will be in the range of $37-40 billion, updated from our prior range of $35-40 billion. While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts. Absent any changes to our tax landscape, we expect our full-year 2024 tax rate to be in the mid-teens. In addition, we continue to monitor an active regulatory landscape, including the increasing legal and regulatory headwinds in the EU and the U.S. that could significantly impact our business and our financial results." Also, on its earnings conference call, the company noted that 3.2B people are using at least one of the company apps and that Threads is approaching 200M monthly active users. Shares were up 7% one week ago following the call. JPMorgan bumped the firm's price target on Meta Platforms to $610 from $480 and backed an Overweight rating on the shares. The company is executing well near-term and investing appropriately in critical long-term initiatives, notably artificial intelligence, the analyst contended. The firm said the Q3 revenue outlook implies 1% of currency deceleration from Q2 at the high end despite 900 basis points tougher comps as Meta laps heavy China advertiser spending, Reels monetization ramp, and strong engagement tailwinds from 2023. Loop Capital raised the firm's price target on Meta to $575 from $550 and kept a Buy rating on the shares following last week's beat and raise report. Meta was the fastest growing of the major ad platforms to have reported Q2 results, exceeding Amazon Ads for the second consecutive quarter, the analyst told investors in a research note. Meta continues to deliver superior growth despite its greater revenue scale and Loop is increasingly optimistic about the company's expanding opportunity set as it deploys more genAI applications across its massive base of users.
ADDITIONAL ANALYST COMMENTARY: BofA increased its price target on Reddit to $60 from $57 and keeps a Neutral rating on the shares following a "solid" Q2 beat with product execution driving user growth and issuance of a Q3 revenue outlook above the Street forecast. Given historical Q3 sequential growth and momentum in the ad business, the firm believes the company's revenue guidance is "likely conservative," but also that Q3 will "likely be peak growth" with deceleration likely on tougher second half Google traffic comps.
LightShed Partners initiated Reddit with a Buy rating and $84 price target. The firm noted that it had walked out of Cannes Lions in late June "excited by Reddit's growth story, with ad buyers openly discussing their interest in the platform" in its initiation of the stock. Cannonball Research initiated coverage of the stock with a Buy rating as well.
Seaport Research lowered the firm's price target on Pinterest (PINS) to $45 from $49 and keeps a Buy rating on the shares. The company reported "solid" Q2 results, with continued strength from lower funnel objectives and several verticals, the analyst said. However, due to industry challenges, food and beverage was relatively soft, the firm added. While disappointed by the slightly lower Q3 guidance, the firm remains positive on the shares.
BofA dipped the firm's price target on Snap to $13 from $16 and held a Neutral rating on the shares. Following a Q2 revenue miss and Q3 revenue outlook that "underwhelms high expectations," the firm is lowering its 2025 revenue forecast by 2% and EBITDA view by 22%, the analyst noted. While stating that underlining fundamentals for the direct response business are "trending in the right direction," the analyst continues to prefer others in the social sector
RBC Capital reassessed an Outperform rating and $570 price target on Meta after its "strong" Q2 beat and guidance raise, helping to "justify" the company's elevated capex. Meta management also "better unpacked" the AI strategy, which investors have been wanting given rising ROIC scrutiny, the analyst tells investors in a research note. While Meta admits it doesn't totally know how big the AI opportunity set can be, by continuing to accumulate differentiated compute capacity, the company is creating "max long-term optionality", RBC added.
