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Meta Platforms Under Legal Scrutiny: Is Now the Time to Buy?

Julian CruzTuesday, May 20, 2025 9:34 am ET

4min read

Meta Platforms (NASDAQ: META) has become the focal point of a high-stakes legal battle, with Pomerantz Law Firm investigating potential securities fraud tied to delays in its AI model "Behemoth." While the stock plummeted 2.88% in two days following the news, this turbulence may present a rare buying opportunity for investors willing to look past short-term noise and focus on Meta’s long-term dominance in AI and digital advertising.

The Legal Crossroads: Pomerantz’s Investigation and Market Impact

Pomerantz LLP’s probe centers on whether Meta’s executives misled investors about the progress of Behemoth, its next-generation AI model. The Wall Street Journal reported that internal struggles to refine the model led to repeated delays, with the April rollout pushed to "fall or later." This news triggered a $19.02 drop in Meta’s share price, closing at $640.34 on May 16—marking a key entry point for contrarian investors.

However, Meta’s fundamentals remain robust. Q1 2025 revenue surged to $42.31 billion (up 16% year-over-year), driven by AI-enhanced ad tools that boosted click-through rates by 5%. CFO Susan Li’s cautious guidance of $42.5–$45.5 billion for Q2 2025 still reflects confidence in Meta’s core business.

Regulatory Headwinds or Overblown Fears?

Beyond the Pomerantz investigation, Meta faces escalating regulatory challenges in Europe. The European Commission fined the company €200 million under the Digital Markets Act (DMA) for its "consent or pay" ad model, which required users to either accept targeted ads or pay a subscription fee. Meta plans to appeal, but compliance adjustments may disrupt its ad-free service model starting Q3.

Meanwhile, privacy advocates like NOYB (None of Your Business) are demanding Meta halt AI training on EU user data unless explicit opt-in consent is obtained. A potential class-action lawsuit could expose the company to billions in damages. Yet, Meta’s defenses—such as its opt-out mechanism for AI training and exclusion of minors’ data—suggest it is adapting to regulatory demands while preserving its AI roadmap.

Why This Is a Buying Opportunity

Undervalued Amid Panic Selling: Meta’s stock trades at $656.03, below its 12-month analyst target of $702.99. The recent dip reflects knee-jerk reactions to legal news, not fundamental weakness.
AI-Driven Growth Unchanged: Meta’s Q1 results prove its ad business remains resilient. The Generative Ads Recommendation Model and its Advantage+ suite are expanding advertiser reach, with ad pricing up 10% year-over-year.
Class-Action Mitigation: Investors who join Pomerantz’s class action (by contacting newaction@pomlaw.com) could recover losses if the case succeeds, reducing downside risk.
Global Dominance in Social Media: Facebook, Instagram, and WhatsApp collectively serve 3.8 billion monthly active users—a moat no competitor can easily breach.

Risks and the Path Forward

Regulatory Uncertainty: The EU’s "consent or pay" ruling and GDPR challenges could divert resources from innovation.
Legal Costs: Pomerantz’s investigation and potential class-action settlements may pressure short-term profits.

Yet, these risks are already priced into the stock. Meta’s AI investments—such as its Llama series and partnerships with Microsoft—are positioning it to lead the generative AI revolution. Even if fines reduce European revenue, Meta’s U.S. and emerging-market growth remain untethered.

Final Analysis: Buy Now, Wait for the Fog to Clear

Meta is at a pivotal juncture: legal and regulatory storms may delay its AI ambitions, but they won’t derail them. The stock’s dip to $640 creates a compelling entry point for investors who can stomach near-term volatility. With a fortress balance sheet ($30 billion in cash as of Q1 2025) and unmatched ad tech, Meta’s long-term trajectory remains intact.

Act now:
- Entry Point: $640–$650 (current price as of May 20).
- Upside Catalysts: Positive Pomerantz case resolution, successful AI product launches, or regulatory settlements that clarify its European path.

The market may be overreacting to noise. For investors with a multi-year horizon, Meta’s AI-driven future and unmatched scale make it a buy at today’s prices.

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