Meta Stock Faces Fresh Pressure? Report Of WhatsApp Privacy Lawsuit Surfaces Ahead Of Q4 Earnings

Retail investors remain ‘bullish’ on Meta stock, according to Stocktwits data.

• A group of plaintiffs has filed a lawsuit in San Fransciso, alleging that Meta lied about WhatsApp’s privacy features and defrauded users.
• Complainants, helped by ‘whistleblowers,' say Meta’s claims to related to WhatsApp’s ‘end-to-end’ encryption are false. 
• Meta stock is in the red so far for this month, ahead of the company’s quarterly report on Wednesday. 

Meta Platforms, Inc.’s shares will be in focus on Monday after a Bloomberg report over the weekend detailed a new lawsuit against the social media company.

An international group of plaintiffs has sued the company in a San Fransciso court, alleging that it made false claims about the privacy and security of its WhatsApp chat service. The suit says that Meta and WhatsApp “store, analyze, and can access virtually all of WhatsApp users’ purportedly ‘private’ communications” – and accuse the companies and their leaders of defrauding WhatsApp’s billions of users worldwide, according to the report.

WhatsApp uses “end-to-end” encryption, which is turned on by default for user chats. WhatsApp claims that with encryption enabled, “only people in this chat can read, listen to, or share” the messages, not the company or its employees.

The complaints, which include plaintiffs from Australia, Brazil, India, Mexico, and South Africa, cite “whistleblowers” as having helped bring this information to light, though it doesn’t identify them.

Meta spokesperson Andy Stone told the news agency that the lawsuit is “categorically false” and “a frivolous work of fiction.”

In July last year, Meta CEO Mark Zuckerberg, along with the company’s current and former directors and officers, agreed to settle a shareholder lawsuit for a reported $8 billion. The suit, rooted in the Cambridge Analytica scandal, alleged that Meta’s leadership ignored a 2012 FTC privacy agreement and failed to adequately protect Facebook users’ data.

The next month, Meta settled for $725 million in a class action lawsuit from users alleging that the company shared their data with third parties without permission or made this data accessible without proper security. 

Notwithstanding the legal developments, investors are watching the stock ahead of the social media giant’s quarterly report on Wednesday. 

On Stocktwits, the retail sentiment for META remained ‘bullish’ and ‘high’ message volume as of early Monday. And analysts overwhelmingly recommend buying META (60/67), according to Koyfin.

They expect the company’s fourth-quarter revenue to rise 21% to $58.4 billion and adjusted profit to increase by 2% to $8.19 per share. Meta stock gained nearly 13% last year and is marginally down so far this year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<