Why Is Meta Platforms (META) Stock Under Pressure Today?

  • Shares of Meta Platforms (META) were down today on news the company has settled a government lawsuit.
  • The lawsuit requires that Meta revises its advertising platform amid accusations it discriminates against certain groups.
  • The lawsuit settlement is the latest in a string of negative news impacting META stock.
META stock - Why Is Meta Platforms (META) Stock Under Pressure Today?

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Shares of Meta Platforms (NASDAQ:META) were down today after the parent company of Facebook settled a legal case with the U.S. government.

Meta Platforms agreed to alter its advertising delivery system to address government concerns that it discriminated against users in violation of the Fair Housing Act. The Silicon Valley-based company said it will use new technologies for employment and credit advertisements, particularly ones that involve housing in the U.S. The company also agreed to pay a fine of $115,054 as part of the settlement.

META stock was down nearly 1% in premarket trading today at $157.05 per share, bringing its year-to-date decline to 54%. Its price has recovered since then, fluctuating around $158 per share.

What Happened With META Stock

The U.S. Department of Housing and Urban Development brought a lawsuit against Meta Platforms. It claimed the company’s algorithms enabled advertisers to violate fair housing laws by preventing people from seeing housing ads based on protected characteristics such as race, sex and disability.

Meta acknowledged the government’s complaint and said in a blog post that it will “work to ensure the age, gender and estimated race or ethnicity of a housing ad’s overall audience matches the age, gender, and estimated race or ethnicity mix of the population eligible to see that ad.”

Meta’s advertising practices have come under increasing scrutiny in recent years with claims that its ads alternately target or exclude certain people or groups of people based on their race and religion. The company said its new advertising system should be operational by the end of this year.

Why It Matters

The legal settlement is the latest in a string of bad news for Meta Platforms. The company is in the process of rebranding and refocusing its operations on development of the metaverse, a virtual reality world that is largely theoretical at this point. Yesterday, Meta Platforms chief executive Mark Zuckerberg publicly displayed several virtual reality headset prototypes the company is developing as part of its $10 billion investment in the metaverse.

Meta is trying to lessen its reliance on and association with Facebook, though the bulk of the company’s revenue continues to come from advertising on the social media platform. The lawsuit from the Department of Housing is the latest in a long line of complaints and criticisms related to Facebook. In recent years, the social media site has faced charges that it helps to spread misinformation and worsen political division around the world.

META stock has been pressured in recent months, in large part by the backlash against Facebook and its practices. It has also been impacted by slowing advertising growth on the platform and a general downturn in technology stocks as interest rates rise.

What’s Next for META Stock

The decline in META stock looks likely to deepen today as the entire technology sector continues to selloff and investors seek safe haven assets. That Meta Platforms is able to put the latest government lawsuit against it in the rearview mirror is positive. But it is one more indication of the issues that continue to plague the social network.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Article printed from InvestorPlace Media, https://investorplace.com/2022/06/why-is-meta-platforms-meta-stock-under-pressure-today/.

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