Meta shares could rise about 40% after $17B settlement, AI

Meta Platforms agreed to pay $17 billion to resolve allegations that its social media products contributed to harm among young users. The settlement requires daily usage limits for under-18s and an option for those users to switch to a nonalgorithmic feed. About $5.3 billion of the payment is contingent on other platforms reaching similar agreements.

Shares trade at roughly 16 times forward earnings, near a 25% discount to the company’s long-term average and about 45% below their 2025 peak, according to Morgan Stanley analyst Brian Nowak. Nowak has an overweight rating with a $775 price target, implying about 36% upside. BofA Securities maintained a buy rating and set an $810 target, about 40% above current levels.

Analysts point to two major AI initiatives that could affect Meta’s revenue mix. Reports describe Hatch as a consumer AI agent built to run inside Instagram and WhatsApp. The agent is expected to perform tasks autonomously, including browsing websites, making purchases, booking restaurants, filling forms and sending messages. Reports also say Hatch will store user preferences and that Meta is considering subscription tiers, with some premium options reported as high as $200 per month. BofA’s outlook assumes an early September launch for the agent.

Meta is also developing a flagship foundation model codenamed Watermelon, targeting an October release. Watermelon is expected to serve as the main inference engine for Hatch after launch, giving Meta control over a core AI layer used across products.

Analysts expect AI work to affect Meta’s advertising business as well. Bernstein analyst Mark Shmulik wrote that recent quarters show AI strengthening the position of the largest advertising platforms and suggested Meta could become a major beneficiary. Shmulik forecasted that Meta could overtake Google search in advertising revenue by the end of 2026 and possibly surpass Google’s overall advertising business by 2030.

Morgan Stanley’s Nowak wrote that the settlement could allow Meta to accelerate product deployments. He also noted that youth-use limits might pose a larger headwind to competitors with higher youth engagement, pointing to higher average daily usage on video platforms compared with Meta’s apps.

Analysts who outline upside from Hatch, Watermelon and other products also list execution risks. Those risks include convincing users to adopt an autonomous agent regularly, converting some users to paid subscriptions, and maintaining advertising growth while complying with new youth-focused rules.

Nowak estimated that a suite of new products could add more than $10 to annual earnings per share if they succeed. The timeline cited by analysts centers on launches in September and October and on near-term application of AI to improve ad targeting and engagement. The settlement and the AI roadmap are factors investors are weighing when assessing Meta’s valuation and near-term strategy.