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Facebook Faces Little Risk from FTC Lawsuit, Analysts Say

Analysts say the FTC complaint against Facebook has some bark but little bite.
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Facebook  (FB) - Get Meta Platforms Inc. Class A Report faces little risk from the antitrust lawsuit the Federal Trade Commission filed against the social media giant, several analysts said. 

Shares of the Menlo Park, Calif., social-media giant at last check were little changed at $277.88.

The FTC and most states filed an antitrust lawsuit, charging that the company engaged in anticompetitive behavior to maintain a monopoly position in personal social networking.

KeyBanc Capital Markets analyst Justin Patterson said he was struggling with "why a breakup -- a process that could take years given technical complexities -- should take place."

"Instead, we believe this will likely be resolved with another fine and additional scrutiny on future M&A," said Patterson, who rates the stock overweight with a $340 price target.

The FTC alleges that Facebook undertook a years-long effort to maintain a monopoly through anticompetitive acquisitions and actions that target potential and nascent rivals.

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The commission is demanding that Facebook unwind the acquisitions of photo-focused network Instagram and messaging app Whatsapp. 

"We believe Facebook’s virtual ownership of the social graph, strong competitive moat, and focus on the user experience position it to become an enduring blue-chip company built for the long term," J.P. Morgan analyst Doug Anmuth said.

Anmuth, who rates Facebook overweight with a $330 price target, said that "Facebook is in rarefied air across the combination of scale, growth, and profitability, as the company’s massive reach and engagement continue to drive network effects, and its targeting abilities provide significant value to advertisers."

Wedbush analyst Michael Pachter said that while there is certainly merit to the FTC’s allegations that Facebook strengthened its competitive position” when it bought Instagram and WhatsApp, the firm is “skeptical that the FTC will prevail,” as it is difficult to see how Facebook “precluded competition.”

“We can only conclude that the FTC suit is intended to make headlines,” Pachter said, adding that he was skeptical "that a federal court will compel a divestiture, and equally skeptical that a divided Congress will pass a law that forces such a result.”

Baird analysts said in a note that the complaint has some bark but “little bite.” 

“We do not see much in the way of ‘teeth’ in today’s FTC/states complaint about Facebook,” Baird said, adding that  there is “very little likelihood that punitive recommendations to split the company will occur.”