Things have been tough for Meta Platforms (NYSE: META) this year and the stock has lost almost two-thirds of its market cap YTD. Troubles continue to mount for the company and now the EU has accused it of antitrust.
According to the EU’s initial findings, Meta Platforms used its dominant market position to unduly benefit the Facebook marketplace. competition EU’s chief Margrethe Vestager said, “Our preliminary concern is that Meta ties its dominant social network Facebook to its online classified ad services called Facebook Marketplace.”
She added, “This means Facebook users have no choice but to have access to Facebook Marketplace.” If in the final findings the EU finds that Meta Platforms indeed abused its dominant market position it can impose a fine of up to 10% of the company’s turnover.
To put that number in perspective, Meta Platforms reported revenues of $27.71 billion in Q3 2022 and guided for revenues between $30-$32.5 billion in the fourth quarter.
Meanwhile, Meta Platforms has denied the allegations. Tim Lamb, head of EMEA competition at Meta said, “The claims made by the European Commission are without foundation. We will continue to work with regulatory authorities to demonstrate that our product innovation is pro-consumer and pro-competitive.”
Troubles Mount for Meta Platforms as EU Accuses It of Antitrust
EU accusing Meta Platforms of antitrust adds to the long list of troubles for the company. The Media bill in the US is another headwind for the company. If the bill gets passed, Facebook would need to pay news publishers for hosting content. The company is meanwhile not willing to do so and has instead threatened to remove news altogether from its platforms.
A similar law was previously passed in Australia also after which Meta Platforms removed news in the country. Later it restored news after the country toned down the strict regulations.
New Zealand and Canada are also contemplating laws to make companies like Facebook pay for news content. There has been a global clamor against Big Tech companies amid privacy and antitrust concerns. Incidentally, Big Tech companies have sagged this year and most barring Apple are underperforming the broader markets.
Analysts see Apple stock as a safe haven amid market mayhem. Even Warren Buffett bought Apple shares in the first half of 2022. We have a guide on how to buy Apple stock.
Meta Platforms is Witnessing a Growth Slowdown
Meta Platforms is witnessing a growth slowdown and its revenues fell YoY in both the second and third quarters of 2022. It forecast that revenues would fall YoY in the fourth quarter as well.
Along with the slowdown in ad spending, Apple iPhone privacy rules have also hit Facebook. The company previously said that the new rules would lower its 2022 revenues by around $10 billion.
To make things worse, Meta Platforms’ metaverse business is losing billions of dollars every quarter. The company’s costs have also increased amid spiraling inflation and last month Mark Zuckerburg announced mass layoffs and cost-cut measures.
He termed the changes as “some of the most difficult changes we’ve made in Meta’s history.” Zuckerburg said that like many others, he also believed that the super-high growth that the company saw in the early days of the pandemic would continue even after the pandemic, and significantly increased investments.
He however added, “Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected.”
Recession Fears Rise amid Fed’s Rate Hikes
While many analysts are apprehensive about Meta Platforms in the short term, JPMorgan upgraded the stock to overweight and raised its target price to $150. The brokerage advises buying Meta Platforms stock and sees the company doing well in 2023.
Meanwhile, the slowdown in the US and global economy is a headwind for Meta Platforms. Recession fears have increased as the Fed looks in no mood to pivot to rate cuts anytime soon. While Fed chair Jerome Powell is still hopeful of a soft landing for the US economy, an increasing number of economists now see a recession in 2023.
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