Meta Platforms Receives "Market Perform" Rating from BMO Capital

• BMO Capital updates the Meta Platforms rating to "Market Perform" due to concerns over free cash flow burn.
• Despite challenges, Meta Platforms shows a modest stock price increase and has a promising outlook, with a significant price target of $935 by 2027.
• Meta faces controversy over data use policies and a significant class-action lawsuit, yet its stock price has seen a notable increase year-to-date.

On Wednesday, June 12, 2024, BMO Capital updated its rating on Meta Platforms (NASDAQ:META) to "Market Perform," indicating a hold action. This assessment came as the stock was trading at approximately $507.47. The revision underscores BMO Capital's concerns regarding an increasing risk of free cash flow burn at Meta Platforms. Meta Platforms, Inc., known for its significant presence in the social media and technology sector, has been a subject of financial analysis due to its dynamic market performance and strategic business decisions.

Despite BMO Capital's cautious stance, Meta Platforms has shown a modest stock price increase of approximately 1.75% since the last coverage, slightly underperforming the S&P 500 by around 3%. This performance is part of a broader narrative of growth for the company, as highlighted by an updated analysis on Seeking Alpha. The analysis, incorporating both technical and regression analysis, forecasts a promising outlook for Meta's stock price by 2027, with a significant price target of $935. This projection represents an impressive growth potential of 86.2%, attributed to key factors including Meta's expanding user base and its continuous innovation in product offerings.

In addition to its financial performance, Meta Platforms has recently announced a pivotal shift in its data use policies, specifically targeting the training of generative AI models. This strategic move to incorporate publicly shared content from European users on Instagram and Facebook into its AI training processes reflects the company's commitment to enhancing its AI features. However, this decision has sparked controversy and led to multiple complaints across Europe, calling for a halt to Meta's data practices over concerns related to user privacy and data protection, as reported by Benzinga.

Furthermore, Meta Platforms is currently facing a significant class-action lawsuit related to the Cambridge Analytica privacy scandal, with the Supreme Court announcing it will review the case. This lawsuit, which involves billions of dollars, stems from allegations surrounding the misuse of Facebook user data by the political consulting firm Cambridge Analytica. Despite these challenges, Meta's stock has continued to perform well, with a notable 40% increase in its stock price year-to-date, nearing record highs after a staggering 469% rise since the low of November 2022.