Meta Platforms (FB) Sued by Australian Authorities Over Fake Ads

Meta Platforms FB has recently been sued by the Australian competition watchdog for posting fake celebrity advertisements on its social media platform.

Per Independent, the Australian Competition & Consumer Commission (ACCC) complained that Meta failed to prevent scammers from promoting fake advertisements of celebrities endorsing misleading products.

Misled by fake endorsements by the likes of famous Australians, the scams were leading people to invest in cryptocurrency or false money-making schemes.

The Australian authorities have also accused Meta of not taking necessary steps to ensure the protection of users despite having prior knowledge of such illicit activities on its platform.

Increasing Legal Woes: A Major Headwind

Meta’s legal woes are ever-increasing and negatively impacting the share price movement. A few days ago, the Russian authorities launched a criminal investigation against Meta while prosecutors have asked a court to mark Meta as an extremist organization. Instagram has been banned in the country since March 11.

Meta has recently launched parental control in Facebook, Instagram and Occulus Quest Virtual reality set, following an uproar stemming from a whistle-blower leaking internal documents. The document stated that the company knew that certain teenage girls were having issues on Instagram regarding posting pictures, particularly body images.

Meta Platforms, Inc. Price and Consensus

Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote

Amid all these, Meta’s shares have tumbled 37.1% in the year-to-date period underperforming the Zacks Internet – Software industry’s and the Zacks Computer and Technology sector’s decline of 29.5% and 12.3%, respectively.

Meta’s social media peer Snap SNAP has been facing similar allegations. Snap’s Snapchat platform announced new parental controls for its platform in January this year to limit friend suggestions for teen users and protect them from unwanted attention.

Snapchat’s recent initiatives come following allegations that the company has been failing to prevent drug-related content from proliferating its chatting platforms, specifically among its users aged below 18.

Snapchat has been the most preferred social network among Gen Z compared with its rival Meta’s Facebook or Instagram and Twitter TWTR.

However, Twitter’s unique platform, even though it is different from Instagram, has been gaining momentum among users of all age groups due to its openness, real-time content, conversational format, and simplicity. It has been able to protect the security of users in its platform and thus boost trustworthiness.

Zacks Rank and a Stock to Consider

Recent legal issues and concerns regarding unethical practices by Meta have led the stock to underperform. This is quite evident from its Zacks Rank of 5 (Strong Sell).

In the broader Computer and technology sector, Advanced Micro Devices AMD is a stock worth considering.

AMD currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the year-to-date period, AMD shares have fallen 19.4% compared with the Zacks Electronics - Semiconductors’ decline of 12.2%.

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