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#SocialStocks: Supreme Court looking into laws restricting editorial rights

Posted February 29, 2024 at 10:15 am
Andrew Perez
The Fly

Meta yet again exposed for not protecting children, Zoom jumps following earnings 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.

AI INACCURACY: 

As Google (GOOGL) faces issues over historically inaccurate responses on its Gemini chatbot, Meta (META) is dealing with a similar issue, Sylvia O'Regan and Kalley Huang of The Information reported. Meta is trying to overcome a problem in Llama 2, specifically its answers to anything contentious are not helpful. Last July, safeguards were added to Llama 2 to prevent the model from answering a broad range of questions deemed controversial. However, these guardrails have made Llama 2 too “safe” in the eyes of Meta's senior leadership, according to sources at the company.

AR GLASS DEMO: 

Meta Platforms aims to reveal and demonstrate, but not launch, the first version of its AR glasses, codenamed Orion, during its Connect developer conference in the fall, Business Insider's Kali Hays wrote.

POTENTIAL FIRST AMENDMENT VIOLATION: 

The Supreme Court on Monday seemed wary of laws in Florida and Texas that prohibit major social media companies from making editorial judgments about which messages to allow, The New York Times' Adam Liptak noted. The tech industry has argued that laws in the two states, which were prompted by conservative complaints about censorship, violate the First Amendment.

ELECTION PREPAREDNESS: 

“Meta has been preparing for the EU Parliament elections for a long time. Last year, we activated a dedicated team to develop a tailored approach to help preserve the integrity of these elections on our platforms…These lessons help us focus our teams, technologies, and investments so they will have the greatest impact…Over the last eight years, we've rolled out industry-leading transparency tools for ads about social issues, elections or politics, developed comprehensive policies to prevent election interference and voter fraud, and built the largest third party fact-checking program of any social media platform to help combat the spread of misinformation. More recently, we have committed to taking a responsible approach to new technologies like GenAI. We'll be drawing on all of these resources in the run-up to the election. As the election approaches, we'll also activate an EU-specific Elections Operations Center, bringing together experts from across the company from our intelligence, data science, engineering, research, operations, content policy and legal teams to identify potential threats and put specific mitigations in place across our apps and technologies in real time…,” said Meta Platforms in part, in an earlier blog posting.

CHILD EXPLOITATION: 

New Mexico Attorney General Raul Torrez has accused Meta of not protecting children from sexual predators on its platforms and wants to know how it polices subscribers to accounts featuring children, The New York Times' Michael H. Keller and Jennifer Valentino-DeVries wrote. Torrez has formally requested documentation from Meta about subscriptions on Facebook and Instagram, according to the report. “This deeply disturbing pattern of conduct puts children at risk — and persists despite a wave of lawsuits and congressional investigations,” Torrez said in a statement.

Separately, Meta Platforms safety staff warned the company last year that its paid subscription tools on Facebook and Instagram were being misused by adults seeking profit from exploiting their own children, Jeff Horwitz and Katherine Blunt of The Wall Street Journal reported. Two teams had raised alarms in internal reports after finding hundreds of “parent-managed minor accounts” that were using the subscription feature to sell exclusive content. The content often featured young girls in bikinis and leotards, and was sold to an audience that was overwhelmingly male and often overt about sexual interest in children, people familiar with the investigations said.

EARNINGS RECAP: 

Shares of Zoom Video (ZM) surged over 12% on Monday after the company reported Q4 results, Q1 guidance and FY25 outlook all surpassing estimates from analysts. “In FY24, we unveiled Zoom AI Companion, our generative AI digital assistant, aimed at boosting productivity, enhancing team effectiveness, and fostering skill development across the Zoom platform. We're committed to democratizing AI accessibility, offering it to all our customers regardless of business size, included at no extra charge with a paid license,” stated Eric S. Yuan, Zoom's founder and CEO. “Our team is dedicated to platform-wide innovation, introducing hundreds of new features, including those for Zoom Contact Center, which redefine the gold standard for customer experience. While delivering innovation for our customers, we also drove robust profitability and grew free cash flow, up 24.1% year over year to $1,471.9 million for the full fiscal year, representing a free cash flow margin of 32.5%.” BofA lowered the firm's price target on Zoom Video and keeps a Neutral rating on the shares. The firm applies a multiple against its updated calendar year 2025 estimates at a discount to the less than 20% growth software peer group, which it argues is warranted based on Zoom's weaker visibility with regard to future growth trajectory and an increasingly competitive XCaaS environment. While the firm's revenue estimates remain broadly unchanged, it increased its FY25 non-GAAP EPS estimate by 6% and lowered its FY25 free cash flow estimate by 6% to reflect guidance. On the other hand, RBC Capital analyst Rishi Jaluria kept the same price target on Zoom, but noted the company's Q4 results were “decent” and its outlook was “constructive”. Online showed signs of stabilizing with flat y/y growth and stable churn, and given the platform consolidation opportunities, CCaaS ramping, Online stability, and a prudent view of macro conditions, the stock offers upside, the analyst told investors in a research note.

PAYING FOR CONTENT: 

Indonesian President Joko Widodo signed a regulation requiring digital platforms to pay media outlets that provide them with content, Reuters reports. Digital platforms in the country include Meta's Facebook, Alphabet's Google, and some local aggregators. Google intends to review the regulation and said this action would restrict public access to diverse sources of news instead of promoting quality journalism.

TECH GIANTS AT ODDS:

Apple (AAPL) is coming under fire from Meta and Microsoft (MSFT) who claim Apple's plans to open up its mobile software to comply with the E.U.'s Digital Markets Act do not go far enough, Michael Acton of The Financial Times reports. Apple announced last month it will make changes to the iOS mobile software in Europe to allow users to download apps from other sources and access alternative payment systems. However, Apple plans to add additional charges, such as an additional 3% fee to app developers using its payment processor and a “core technology fee” of 50c for every download or update to apps with more than 1M downloads on alternative app stores.

ADDITIONAL ANALYST COMMENTARY: 

Loop Capital lowered the firm's price target on Snap. The firm is adjusting its model to reflects its expectations of slower growth of 16% in 2024 and 18% in 2025, down from 17% and 21% previous forecasts, the analyst tells investors in a research note. Snap appears to be making progress in regaining monetization momentum, but the next two quarters will likely be make-or-break for the bull case, the firm added.

Originally Posted February 28, 2024 – #SocialStocks: Supreme Court looking into laws restricting editorial rights

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