Meta Platforms expected to keep dealing with E.U. regulatory overhang
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Meta Platforms (NASDAQ:META) is likely to keep dealing with a regulatory overhang for some time in light of the new charges filed by the European Union over Facebook Marketplace, according to an assessment by analyst Justin Post of Bank of America.
Post, who has a neutral rating and $136-a-share price target on Meta Platforms' (META) stock, noted that while Marketplace is only a "modest revenue generator" for the tech giant, there could be some risk of commentary on it during the company's fourth-quarter earnings call as a result of using first-party data and the issues associated with the Digital Markets Act.
"We believe that some level of regulatory discount is already priced into Meta stock," Post said, adding that the potential for a TikTok ban in the U.S. "offers more potential upside than downside from regulatory risk in the E.U."
Post also said that "inherent social media uncertainties" around issues such as antitrust matters, data limitations, and Section 230 protections included in the Communications Decency Act, will likely weigh on the potential for Meta's (META) stock price to rise in the months ahead,
In a statement issued on Monday, Margrethe Vestager, the executive vice president in charge of enforcing the E.U.'s competition policies, said Meta (META) users had no choice but to have access to Marketplace given how intertwined Marketplace is with its social network.
Following the E.U.'s accusation, Meta (META) responded and said Facebook users can choose on their own whether or not they use Marketplace.
Meta (META) could potentially face a fine of up to 10% of global revenue if it is found guilty of violating the Digital Markets Act.
Earlier this month, investment firm J.P. Morgan raised its rating on Meta (META) to overweight, citing an "increased discipline" regarding its cost structure.