The federal authorities in the U.S. are currently probing Meta (NASDAQ:META) regarding potential involvement in the illegal drug trade, the Wall Street Journal reported. Per the report, prosecutors are focusing on content related to illicit drugs on its social media platforms, including Instagram and Facebook. They are looking for records related to the potential illegal sale of drugs through these channels. This scrutiny underscores the mounting legal challenges Meta faces, raising concerns.
Highlighting similar concerns, Meta’s CFO, Susan Li, cautioned during the Q4 conference call about the escalating legal and regulatory pressures the company is encountering in the U.S. and the European Union. Li warned that these risks could significantly impact its operations.
While the outcome of the investigation remains to be seen, the company’s growing legal risks prompt a deeper analysis of its risks.
Meta’s Risk Analysis
Investigations and lawsuits are not new for Meta, as the company consistently faces these challenges from various regulatory bodies. These investigations are related to multiple aspects of its business, including advertising practices, privacy issues, and content.
As Meta navigates through these challenges, TipRanks’ Risk Analysis tool shows that Meta’s legal and regulatory risks account for 20.8% of its total risks. At the same time, its legal and regulatory risk exposure is higher than the industry average of 18.1%.
Is Meta a Buy, Sell, or Hold?
While the social media giant faces rising legal and regulatory risks, analysts are bullish about Meta’s prospects. The company’s revenue, operating margin, and EPS growth accelerated sequentially over the past three quarters. Higher engagement on its platforms, led by reels and video, the integration of generative Artificial Intelligence (AI) into its products, and its focus on cost-cutting drove its share price higher.
Meta stock is up about 145% in one year. With 40 out of 43 analysts recommending a Buy, Meta stock has a Strong Buy consensus rating. Analysts’ average price target on META stock is 528.80, implying 9.23% upside potential over the next 12 months.
