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Friday, December 9, 2022

Facebook 1 FTC 0… but the Game Is Far From Over

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Facebook’s (FB) battles with the lawmakers are set to continue, although the social media giant has just notched a small victory.

On Monday, a federal judge rejected two monopoly lawsuits filed by the FTC and a group of states that are looking to break up the company.

In the ruling, U.S. District Judge James Boasberg suggested that the FTC failed to adequately prove Facebook has gained its market position unfairly, saying its assertion was “too speculative and conclusory to go forward.” Within 30 days, however, he said the agency could amend its complaint and refile again.

“While we would expect the FTC/States to refile,” said BofA analyst Justin Post, “Given the prep time that undoubtedly went into the original filing, we see this ruling as an important reminder of the challenges the Government faces in establishing that Facebook (or its large-cap peers) have illegal monopolies.”

The lawsuits focus on the acquisition of Instagram in 2012 and WhatsApp two years later. The judge also wondered why it had taken so long following the acquisitions’ close to challenge them.

“We think the ruling suggests that it will be very difficult to break-up Facebook on the grounds that the acquisitions should not have been approved 7 and 9 years ago,” Post further added.

Instead, Post thinks the government’s case against Facebook should focus more on its “behavior and current market share,” although Snap and TikTok’s “strong traction” could turn out to be FB’s best antitrust retort.

Based on talks with legal experts and historic precedents, there’s a very slim chance of a Facebook breakup, while laws both in the U.S. and the EU would need to change to make the “operating/antitrust environment more difficult for Facebook.” That, however, is a real possibility with new FTC chairwoman Lina Khan at the helm. Post thinks regulatory enforcement seems “likely to increase,” indicating the regulatory battle is set to continue.

“We view this dismissal as a positive step based on: 1) highlights the hurdles U.S. antitrust enforcers face in trying to break up tech companies, and 2) a noticeable change from continued negative regulatory news over the last year,” the 5-star analyst summed up.

All in all, Post reiterated a Buy on FB shares backed by a $400 price objective. Upside from current levels is 13%. (To watch Post’s track record, click here)

Facebook retains most of the Street’s support; the stock has a Strong Buy consensus rating, based on 30 Buy, 4 Holds and 1 Sell. The average price target clocks in at $386.61, indicating shares will appreciate by 10% over the coming months. (See Facebook stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The post Facebook 1 FTC 0… but the Game Is Far From Over appeared first on TipRanks Financial Blog.

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