BMO Capital Reiterates Market Perform on Meta, $580 Price Target

BMO Capital analyst Brian J.

Pitz reiterated a Market Perform rating and $580 price target on Meta Platforms Inc. (NASDAQ: META).

“What Happened: META has reached an agreement with 52 Attorneys general (excludes FL and NM) in which it has agreed to pay up to $18B in penalties.

The payments will be distributed in annual installments over a 10-year period.

META will only pay out 70% of the settlement (or $12.7B), unless TikTok and YouTube also agree to set default one-hour time limits a day on their apps for younger users, implement nighttime restrictions, add age assurance measures, and pay $5.3B in penalties each.

Structural Remedies Are More Impactful to Core Fundamental Story: While the $12.7B+ fine is a meaningful penalty, we expect investors will be primarily focused on structural remedies including: 1) Daily usage limits (up to two hours per day, or one hour if competitors follow suit) that can be turned off with parental consent; 2) Night Mode that blocks teen access from 12am-6am (or 10pm-7am if competitors follow suit); 3) Enhanced age assurance measures to prevent minors from creating accounts; 4) Parental controls and tools to monitor/restrict usage; 5) School Mode that mutes notifications between 8am-3pm.

While we believe the settlement will help to alleviate pressures on child safety by resolving key compliance concerns around the Children’s Online Privacy Protection Act (COPPA), we believe it could reinvigorate congress to increasingly regulate social platforms.

Settlement Alleviates Key Near-Term Headwind for META: However, we believe investors will now focus on how these remedies could impact user engagement/time spent, and the impacts that will have on ad load and ad pricing.

META and state AGs are urging peers including YouTube and TikTok to implement similar remedies, which would drive a structural change in the way younger users access/consume broader social media.

Maintain Market Perform and $580 target price on go-forward engagement headwinds and continued questions on capex ROI.”

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