#SocialStocks: Tech heads testify in child safety hearing

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

SENATE JUDICIARY COMMITTEE HEARING: The CEOs of the top five social media platforms, including Meta‘s (META) Mark Zuckerberg and X’s Linda Yaccarino, took a defensive stance ahead of a hearing with Congress, where the leaders were grilled over their perceived failure to protect children online, Hannah Murphy of The Financial Times said. The hearing is meant to address concerns that social media platforms expose younger users to child predators and groomers, and also provide a marketplace for child pornography. The CEOs of TikTok, Snap (SNAP), and Discord are the other three executives summoned by Congress for the hearing.

Lawmakers criticized leaders from the five social media platforms during the hearing, Oma Seddiq and Alex Barinka of Bloomberg noted. The companies faced admonishment for their previous efforts to safeguard children, and lawmakers urged them to endorse and support new legislation in this regard. “These companies must be reined in, or the worst is yet to come,” Senator Lindsey Graham said. “You have a product that’s killing people,” he added. His comments were reportedly met with an uproar of applause and cheers from advocates in attendance.”

At one point in the hearing, Zuckerberg stood to apologize to the families in the hearing room, according to Brian Fung and Aditi Sangal of CNN. Meta’s chief executive said: “I’m sorry for everything you have all been through. No one should go through the things that your families have suffered and this is why we invest so much and we are going to continue doing industry wide efforts to make sure no one has to go through the things your families have had to suffer.”

Earlier in the week Meta highlighted a well-being pilot program and Meta said in a blog post: “We’re building on our work to provide age-appropriate experiences for teens, and to make it simpler for parents to shape their teens’ online experiences. We’re taking additional steps to help protect teens from unwanted contact by turning off their ability to receive messages from anyone they don’t follow or aren’t connected to, by default. Before a teen can change certain Instagram settings they will now need approval from their parents through Instagram’s parental supervision tools.”

Additionally, Meta announced on January 25 that it is partnering with the Center for Open Science on a pilot program to share certain privacy-preserving social media data with a select group of academic researchers to study topics related to well-being. Social media companies, like Meta, have an opportunity to contribute to the public’s scientific understanding of how different factors may or may not impact well-being and inform productive conversations about how to help people thrive. This pilot is designed to support that goal, and it will use new types of research processes that have been popularized in the open science movement, such as preregistration and early peer review, Meta said. “At Meta, we want to do our part to contribute to the scientific community’s understanding of how different factors may or may not relate to people’s well-being. We’re committed to doing this in a way that respects the privacy of people who use our apps. COS has a proven track record of supporting scientific rigor and complex open-science projects, and we look forward to partnering with them on this pilot. We also hope it can provide a model for other companies to take similar steps,” said Curtiss Cobb, VP of research at Meta.

PINTERESTED: Cathie Wood’s ARK Investment bought 55K shares of Pinterest (PINS) on January 30.

IMMERSIVE COLLABORATION: Zoom (ZM) launched a new app for Apple (AAPL)Vision Pro to make hybrid collaboration more immersive… The company said in a release: “Zoom announced a new app designed for Apple Vision Pro, giving users the ability to connect with colleagues and customers in a more real-world, immersive environment, available on February 2. Zoom’s app for Apple Vision Pro seamlessly blends video conferencing with users’ physical space, blurring the lines of in-person and remote meetings with the infinite canvas on Apple Vision Pro, helping distributed teams feel more connected and included. “Zoom on Apple Vision Pro helps teammates stay connected no matter when and where they work, or how they communicate and collaborate,” said Smita Hashim, chief product officer at Zoom. “The integration of Zoom on Apple Vision Pro and visionOS extends our platform promise of allowing participants the ultimate meeting experience from anywhere and delivers on our commitment of seamless collaboration and communication.” With people working in-person, remotely, or hybrid, Zoom is helping users facilitate connection, productivity, and collaboration with their colleagues and customers. Zoom’s app on Apple Vision Pro provides users with a native experience for meetings, giving them exceptional audio and video quality, as well as the ability to easily start, join, collaborate, and schedule meetings.”

MID-SINGLE DIGITS: Reddit is targeting a valuation “in the mid-single-digit billions” for its planned IPO in March, after raising funds at a $10B valuation in 2021, Bloomberg’s Ryan Gould and Bailey Lipschultz reported. According to people familiar with the matter, Reddit is weighing feedback from early meetings with potential investors that it should consider a valuation of at least $5B.

STATE PARTNERSHIP: Governor Eric Holcomb, board chairman for the Indiana Economic Development Corporation, joined executives of Meta Platforms as the company announced plans to establish a new $800M data center campus in Indiana. The nearly 700,000-square-foot facility at the River Ridge Commerce Center in Jeffersonville, which will be the company’s 18th in the U.S. and 22nd in the world, will “be an important part of the global infrastructure that brings Meta technologies and services to billions of people around the world,” the Office of Governor Eric Holcomb stated. Meta is starting construction this month and expects the data center to be operational in 2026. In addition to the 100 operational jobs, the company also expects to support more than 1,250 jobs at peak construction. Governor Eric Holcomb stated: “Indiana’s efforts to cultivate industries of the future are already paying dividends for Hoosiers, attracting growth in critical sectors like data storage, semiconductors, energy and electric vehicles. We’re excited to welcome Meta to Indiana and look forward to the company’s partnership in growing Jeffersonville and the southeast Indiana region.”

STOCK SALE: In a regulatory filing, Meta disclosed that its COO Javier Olivan sold 9K shares of common stock on January 22nd in a total transaction size of $3.5M.

ANALYST COMMENTARY AHEAD OF EARNINGS: Roth MKM raised the firm’s price target on Pinterest to $37 from $31 but maintained a Neutral rating on the shares. The company is one of the highest quality SMID-cap Internet stocks with identifiable catalysts and the firm remains constructive on Pinterest over the longer term, but in the near-term, the rising expectations for Q1 and 2024 are fairly captured at current valuation levels, the analyst told investors in a research note.

KeyBanc raised its price target on Meta to $465 from $380 and kept an Overweight rating on the shares. The firm believes Meta ended the year with further momentum in its ad products, particularly Reels. While KeyBanc does not expect FRL losses will peak in 2024, it thinks ad product innovation and budget gains are sufficient to drive 29% and 17% EPS growth in 2024 and 2025, respectively.

Seaport Research raised the its price target on the social media giant to $435 from $390 and reiterated a Buy rating on the shares. The analyst remains positive on the shares ahead of the Q4 results but notes that with the shares up 30% since the Q3 earnings, investors are largely anticipating solid results. The firm expects solid ad growth in Q4 for Meta.

Loop Capital raised the firm’s price target on Meta Platforms to $440 from $375 and backed a Buy rating on the shares. The analyst cited last week’s Reels post by the company CEO Mark Zuckerberg as he had declared a new mission to develop artificial general intelligence, reinforced his commitment the open-source movement, expanded on earlier comments that glasses are the ideal form-factor for AI assistants and disclosed metrics on its GPU capacity, suggesting that Meta has AI compute infrastructure that “may be larger than any other individual company”. While direct monetization of gen-AI might be distant, the success with consumer-facing gen-AI apps could have meaningful implications for Meta stock, the firm told investors in a research note.

Jefferies raised the its price target on Meta to $455 from $425 and reaffirmed a Buy rating on the shares. The firm’s recent digital ad checks have been “the most positive we’ve seen in several years,” says the analyst, who adds that the checks add conviction in Q4 revenue coming in at the high end of guidance and Q1 revenue guidance coming in above the Street view at the high end. Despite the 194% return in 2023, the stock looks “inexpensive” and can “grind higher” with accelerating revenue growth and positive EPS revisions, the analyst told investors in an earnings preview note.

Deutsche Bank upgraded Snap to Buy from Hold with a price target of $19, up from $10. The analyst sees a “clear, strong catalyst path” towards upwards revenue and EBITDA revisions for Snap, supported by Snapchat+ creating incremental revenue, the advertising platform rebuild yielding strong performance results and driving growing advertiser adoption, the Amazon partnership, which the firm says could be material given the $20B a year Amazon spends on advertising, and growing contribution from inbound advertising from China. Recent advertising checks give credence to a successful ad platform rebuild at Snap, evidenced by growing purchase related conversions, which supported a second sequential quarter of ad-spend acceleration from Q3 to Q4 and potentially a continued acceleration into Q1 of 2024, the analyst tells investors in a research note. The firm says this growth profile, coupled with easier compares, “could catalyze improving sentiment.”

Roth MKM also raised its price target on Snap to $14 from $10, but retained a Neutral rating on the shares. The firm is adjusting its model to reflect 2025 estimates, though it has an “incremental negative bias” on the stock heading into earnings amid growing disparity between buy-side and sell-side expectations, the analyst told investors. Roth MKM added that SNAP CEO’s internal memo implies that the company’s AI/ML investments might come above expectations, while its rising focus on U.S. and Europe users and combined Spotlight & Stories could hint at mixed recent engagement trends.

Lastly, Evercore ISI raised the firm’s price target on Pinterest to $50 from $45 and maintained an Outperform rating on the shares. Following the firm’s proprietary tracking and analysis of Pinterest’s Amazon (AMZN) partnership and a series of channel checks, the firm is “materially” raising estimates reiterating shares as its number one small-to-mid cap long in the internet space. The firm now estimates 20% revenue growth in FY24 and notes that its FY25 revenue, EBITDA free cash flow estimates are “now notably above consensus.”