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LivestreamMenuMeta Platforms and a consortium of states reached a $17 billion settlement on Wednesday in a child privacy and social media addiction case that’s hung over Meta stock since 2023. While the $17 billion penalty is no small change – especially in light of the Instagram and Facebook owner’s dwindling free cash flow as it invests in artificial intelligence – it’s a far cry from the $200 billion that attorneys general were seeking and the more than $1 trillion that Meta lawyers thought the company could be liable for. As a result, analysts and investors on Wall Street are calling the settlement a major win for Meta. Jefferies analyst Brent Thill called it a “big clearing event [that] opens the door for the stock” in an email to CNBC on Wednesday. Meta shares rallied in early trading Wednesday on the settlement news and were up about 1.5% in late day trading, rising above $578. META 1M mountain Meta shares over the past month Kevin Simpson, CEO of Capital Wealth Planning, thought the news deserved more of a positive reaction. “I’m surprised,” he said. “If anything, if you don’t own it, I think it’s an opportunity to go in and buy it … with this in the rearview mirror. “It’s a great win for Meta.” Apart from the penalty, Meta agreed as part of the settlement to algorithmic changes that could dampen engagement and the effectiveness of its advertising, dampening investor sentiment toward the resolution of the case. “META agreed to structural remedies that limit usage to two hours per day with nighttime blocks from 12am-6am, which are likely to impact user engagement and ad load,” Brian Pitz at BMO Capital Markets wrote Wednesday. Pitz left his investment recommendation at “market perform,” the equivalent of no more than a “hold,” along with a $580 price target. While the settlement may put Meta investors’ minds at ease for now, while setting a perhaps reassuring precedent for the rest of social media, analysts don’t think the Mark Zuckerberg company is completely out of the legal woods. “[It’s] important to remember that today’s settlement does not cover the thousands of individual plaintiffs’ mental health claims, which could still be material,” Paul Gallant of TD Cowen wrote on Wednesday in reaction. “It’s not compensation for the separate mental health harms claimed by individuals or School Districts. Individual lawsuits likely will be meaningfully more expensive than schools.”Read More
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