Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
ANTITRUST LATEST: A long legal tussle may await Facebook (FB) as 40 state attorneys general said they will be appealing an earlier dismissal of an antitrust suit against the social media company, wrote Cecilia Kang for the NY Times. This comes after Judge James Boasberg of the U.S. District Court for the District of Columbia threw away previous complaints from states as well as the FTC regarding monopolization claims against the social media giant. "We filed this notice of appeal because we disagree with the court's decision and must hold Facebook accountable for stifling competition, reducing innovation, and cutting privacy protections," Letitia James, New York's attorney general told NYT. Facebook has refuted regulators’ lawsuits, saying most of the evidence used against the company were presented to the F.T.C. when that agency approved the mergers of Instagram and WhatsApp years prior. The company contended it does not have a monopoly and pointed to competitors like Snap, Twitter and messaging applications.
In an interview with The Financial Times, the president of the French Competition Authority, Isabelle de Silva, said multimillion euro fines can force Big Tech companies to change their business, even when the company has billions in the bank, Javier Espinoza and Leila Abboud of The Financial Times reported. de Silva told The Financial Times, "By enforcing antitrust law you tackle some inefficiencies that affect growth and profitability in Europe but without prejudicing those big companies. New rules will not prevent companies from making a lot of money and being profitable." de Silva argues the work done by competition regulators is having an impact, for her office has hit Google (GOOG, GOOGL) with EUR 720M in fines in two separate cases. Reportedly, the lackadaisical pace of antitrust probes and the seeming ineffectiveness of the fines have frustrated European regulators. In October 2019, Margrethe Vestager said fines alone were not enough of a deterrent to maintain a fair playing field.
The FTC now has until August 19 to file an amended antitrust suit against Facebook after the agency's initial bid was dismissed by Judge James Boasberg of the U.S. District Court for the District of Columbia, The Wall Street Journal's Ryan Tracy reported. Following the filing of an amended suit, Facebook would have until October 4 to respond. Additionally, the two sides may be able to file additional counterarguments.
GOVERNMENT OFFICIALS TARGETED ON WHATSAPP: Senior government officials around the world, including those in national security positions that are "allies of the U.S.," were targeted by governments using NSO Group spyware during a 2019 attack against WhatsApp that impacted 1,400 users, Stephanie Kirchgaessner of The Guardian reported, citing comments made by WhatsApp's CEO Will Cathcart. Cathcart disclosed these new details following revelations made this week by the Pegasus project, a group of companies which investigated NSO Group. "The reporting matches what we saw in the attack we defeated two years ago, it is very consistent with what we were loud about then," Cathcart said in an interview with the Guardian. In addition to senior government officials, WhatsApp also found journalists and human rights activists were targeted by the 2019 attack. The leak contained tens of thousands of phone numbers of individuals who are believed to be possible surveillance targets of NSO clients, including heads of state such as the French president, Emmanuel Macron, government ministers, diplomats, activists, journalists, human rights defenders, and lawyers.
EARNINGS RECAP/ EARNINGS PREVIEW: Snap (SNAP) and Twitter (TWTR) both reported Q2 earnings last week and share prices rose in response. Snap shares ballooned 16% in after hours trading on Thursday, while Twitter stock gained 5%. Similarly, both companies beat analyst estimates and provided upbeat guidance compared to expectations. Twittter said average monetizable daily active users, or mDAU, were 206M for Q2, compared to 186M in the same period of the previous year and compared to 199M in the previous quarter. Average U.S. mDAU were 37M for Q2, compared to 36M in the same period of the previous year and 38M in the previous quarter. Average international mDAU were 169M for Q2, compared to 150M in the same period of the previous year and 162 million in the previous quarter. Snap DAUs were 293M in Q2, an increase of 55M, or 23%, year-over-year. DAUs increased sequentially and year-over-year in each of North America, Europe and Rest of World. DAUs increased sequentially and year-over-year on both iOS and Android platforms. Piper Sandler analyst Thomas Champion raised the firm's price target on Twitter to $77 from $66 and reiterated a Neutral rating on the shares. The company's Q2 revenue was 41% above Piper's forecasts and EBITDA 40% better, while its daily active users of 206M were in-line with the Street, Champion tells investors in a research note. The analyst says Twitter continues to improve the platform but that he struggles to see the business reaching the 2023 monthly daily active user guide from the investor day in February. Credit Suisse analyst Stephen Ju raised the firm's price target on Snap to $110 from $90 and maintained an Outperform rating on the shares. Snap posted another quarter of accelerated effective CPM growth, serving as a guidepost for its ongoing improvements in ad targeting/optimization, while also extending long term revenue growth durability, particularly as ad load/impressions hikes into perpetuity are ultimately unsustainable, Ju told investors in a research note. The analyst believes this could be the initial stages of a potential 10-year cycle.
Facebook is set to report its Q2 earnings after the bell. The company surpassed expectations in Q1 with DAUs increasing 8%. The company guided Q2 revenue to be flat or modestly accelerate. Analyst estimates expect Facenook Q2 revenue to come in at $27.82B. Expect the company to provide more insight on antitrust cases in the U.S. and abroad. In its Q1 release, the company said, "There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like companies across a wide range of industries, we are closely monitoring the potential impact on our European operations as these developments progress."
FACEBOOK TO LAUNCH CLOUD GAMING ON IOS: Facebook is bringing its cloud gaming services to iOS (AAPL) devices through a web app that users can add to their homescreens, The Verge's Alex Heath reported. "We've come to the same conclusion as others: web apps are the only option for streaming cloud games on iOS at the moment," Facebook's vice president of gaming, Vivek Sharma, told The Verge. "As many have pointed out, Apple's policy to 'allow' cloud games on the App Store doesn't allow for much at all. Apple's requirement for each cloud game to have its own page, go through review, and appear in search listings defeats the purpose of cloud gaming. These roadblocks mean players are prevented from discovering new games, playing cross-device, and accessing high-quality games instantly in native iOS apps - even for those who aren't using the latest and most expensive devices." The Verge noted that Apple’s rules say that developers can’t send users from a native app to a website with payments technology other than its own. A Facebook spokesperson declined to comment on the company's growth plans.
