Morgan Stanley Eyes Good Things Ahead for Meta After $18 Billion Legal Settlement

Key Points

• Meta resolved its youth social media addiction lawsuit by agreeing to pay up to $18 billion over ten years, removing a major overhang on the stock.
• Morgan Stanley's Brian Nowak compared Meta to Alphabet, suggesting the settlement could free management to accelerate AI product launches and boost long-term earnings.
• Despite the legal resolution requiring new youth safety limits, analysts remain overwhelmingly bullish, with 38 Buy ratings and a consensus price target near $785.

Meta Platforms NASDAQ: META just settled a legal headache that has cast a significant shadow over the firm and the stock. The company agreed to pay up to $18 billion over the course of a decade to end its youth social media addiction trial. With this case behind it, one of Wall Street’s top sell-side analysts believes Meta may be at an inflection point.

Morgan Stanley Thinks Meta Could Walk in Alphabet’s Footsteps

Brian Nowak of Morgan Stanley anticipates that the end of the trial will usher in a wave of new product releases at Meta. This would represent a positive development for the firm, as a notable issue with the company’s AI strategy is the relatively few product releases it has announced with real revenue-generating potential.

Nowak has a laundry list of products he believes are in Meta’s pipeline. This includes agentic advertising tools for businesses, subscription offerings, a better version of Meta AI, and a potential cloud business. Nowak estimates that these products and services could add $10 to Meta’s earnings per share (EPS).

If this materializes over time, it would be a very significant growth driver for Meta’s EPS. Notably, in 2025, the company’s adjusted EPS was $29.68, and its GAAP EPS was $23.49. Depending on which metric Nowak is referencing, his forecast implies a 34% to 43% uplift in these figures.

Nowak cites Alphabet’s NASDAQ: GOOGL recent history as a reason Meta could start releasing more products now. This time last year, Alphabet resolved its antitrust case with the Justice Department, after which it began releasing many AI tools and models. The stock went on to perform very well in Q4 2025, rising 29%.

To Meta’s Credit: Muse Models Are Flying off the Factory Line

While Meta’s overall number of AI product releases has been underwhelming, the company has made some meaningful progress on this front recently. In the last five months, Meta has released five new Muse models, including Muse Glimmer and its latest Muse Spark 1.3 in September. This pace of model releases is impressive, rivaling the cadence of OpenAI and Anthropic.

Additionally, Meta is now charging for access to its models on a pay-as-you-go basis, which could meaningfully contribute to revenue. This comes as Muse Spark 1.3 ranks highly on a variety of key AI model benchmarks. According to model evaluation by Artificial Analysis, Muse Spark 1.3 ranks only below OpenAI and Anthropic’s frontier models on its Intelligence Index. The closer Meta can stay to OpenAI's and Anthropic’s models in terms of intelligence, the more likely it will be to attract paying users.

Furthermore, Meta’s ability to attract paying users should be aided by the model’s much lower price. Artificial Analysis places Muse Spark 1.3’s cost per Intelligence Index task approximately 50% to 80% below OpenAI and Anthropic’s frontier models. Of course, these lower prices may also result in significantly lower-margin sales. Nonetheless, Meta is gaining real momentum with its product releases. It is possible that the end of its legal case will allow management to focus more energy on products and help this momentum to continue.

Youth Restrictions Could Be a Minimal Near-Term Issue

Nowak also made another notable point regarding the implications of Meta’s legal case. As part of its settlement, Meta will have to implement certain features for youth accounts. This includes a two-hour daily time limit across Facebook and Instagram, and blocking usage from midnight to six a.m. These features will likely decrease youth engagement on Meta’s apps, and engagement is the heart of Meta’s business model.

However, according to Morgan Stanley, users under 18 account for just 1% of Meta’s revenue. If accurate, this implies that reduced youth engagement will have a very minimal impact on Meta’s revenue generation in the near term. Still, there could be longer-term negative revenue impacts if these features cause young people to stop using their apps altogether and stay off as they age.

Analysts Coalesce Around Nowak’s Bullish Price Target

Overall, Morgan Stanley clearly has a favorable view of Meta going forward, demonstrated by its $775 price target on the stock. This figure implies about 20% upside in shares.

Morgan Stanley is not alone on this front. Even after seeing some considerable price target decreases after its latest earnings report, Meta still has 38 Buy ratings, compared to nine Hold ratings and zero Sells. The MarketBeat consensus price target is moderately higher than Nowak’s forecast at approximately $785.