Legal and regulatory risks loom large for Meta Platforms (NASDAQ:META) stock. This is evident from the warning the company’s CFO, Susan Li, issued during the Q3 conference call. She explained that increasing legal and regulatory headwinds in the U.S. and the European Union could significantly impact its operations. Adding to this, the social media giant recently faced a setback in a court battle over privacy.
Notably, Li warned that the U.S. Federal Trade Commission (FTC) is seeking to substantially modify the existing consent order and impose additional restrictions on the company, affecting its ability to operate smoothly. She added that the company is contesting this matter. However, now, the U.S. District Court for the District of Columbia has rejected Meta’s request to take control of the dispute with the FTC.
Let’s dig deeper.
Meta Faces Setback in Legal Battle
Per a Reuters report, the FTC accused Meta in May of misleading parents about control over their children’s interactions in the Messenger Kids app. The FTC proposed amending a 2019 settlement and tightening restrictions on Facebook, including prohibiting the monetization of data from users under the age of 18 and imposing broader limits on facial recognition technology.
Further, the FTC contends it has the authority to alter settlements, and the district court had no jurisdiction. Meta, on the other hand, said that the FTC’s allegations lack merit.
Pointing out the challenges posed by regulatory uncertainties, Needham analyst Laura Martin said, “Every month, there seems to be a new negative regulatory headline.” Martin added, “There is a growing list of FTC complaints in its antitrust case against Meta,” suggesting potential adverse outcomes from ongoing regulatory scrutiny. Martin is bearish on Meta stock and reiterated a Sell rating on October 26. Meanwhile, Monness analyst Brian White, who is bullish about Meta, still believes that “regulatory scrutiny persists” for the company and “the darkest days of this downturn are ahead of us.”
What Are Analysts’ Forecasts for Meta Platforms Stock?
TipRanks’ Risk Analysis tool shows that Meta’s legal and regulatory risk exposure is higher than the industry average. Its legal and regulatory risks account for 21.3% of its total risks, which is higher than the sector average of 18.3%.
Nonetheless, Wall Street analysts maintain a bullish outlook about Meta stock due to its lean cost structure, growing ad revenue, and investments in Artificial Intelligence (AI). It has 36 Buy and one Hold recommendations for a Strong Buy consensus rating. Further, analysts’ average price target of $387.65 implies 15.82% upside potential from current levels.
