The legal and regulatory challenges of Meta Platforms (NASDAQ:META) continue to mount, as evidenced by ongoing negative developments reported almost every month. Most recently, a U.S. court has ruled in favor of allowing the U.S. Federal Trade Commission (FTC) to advance its investigation into alleged privacy violations involving Meta’s subsidiary, Facebook. This comes despite the tech and social media giant’s efforts to stall the process through legal means.
It’s worth noting that Meta Platforms filed a lawsuit against the FTC in November 2023 to prevent the agency from unilaterally reopening a consent agreement. This legal action stemmed from the FTC’s accusations in May 2023 that Meta had misled parents regarding control over their children’s activities within the Messenger Kids app. As a result, the FTC proposed modifying a settlement from 2019 and seeking to impose stricter restrictions on Facebook, such as prohibiting the monetization of data from users under the age of 18 and expanding limitations on facial recognition technology.
Meta’s legal action aimed to thwart the FTC’s move to bar the collection of revenue derived from data of individuals under 18. However, the U.S. Court of Appeals ultimately ruled that Meta failed to meet the necessary criteria to justify an injunction during the appeal process. Consequently, the FTC is permitted to continue its investigation.
Meta’s Legal and Regulatory Risks
As legal punches keep coming for Meta, its CFO, Susan Li, cautioned that these headwinds could significantly affect its operations. Li mentioned during the Q4 conference call that the FTC is seeking significant changes to the existing consent order and intends to impose further restrictions on the company, potentially disrupting its business and hurting its financials.
As Meta faces significant challenges, TipRanks’ Risk Analysis tool reveals that its legal and regulatory risks account for 20.8% of its overall risks. At the same time, its legal and regulatory risk exposure is higher than the peer group average of 18.1%.
Is Meta a Buy, Sell, or Hold?
While Meta’s legal and regulatory risks are escalating, analysts still maintain a bullish outlook about its prospects. Meta stock has gained over 128% in one year, reflecting its efforts to drive engagement on its platforms, cut costs, and invest in Artificial Intelligence (AI) technology.
Meta stock has a Strong Buy consensus rating with 40 Buy, two Hold, and one Sell recommendation. Analysts’ average price target on META stock is 530.58, implying 9.27% upside potential over the next 12 months.
