Meta Will Pay $17 Billion to Settle a Federal Lawsuit. Here’s My Prediction of Where the Stock Will Go From Here.

Meta Platforms (NASDAQ:META) is one of the companies leading the artificial intelligence (AI) revolution, but in recent months, investors haven't exactly flocked to this tech leader. The stock has slipped about 13% this year, and a recent lawsuit brought by several states didn't help matters.

But the case, alleging that Meta's apps have been harmful to children, no longer represents an uncertainty for the company or its shareholders. Only days after the opening arguments, Meta agreed to pay $16.7 billion to settle the case. Now, here's my prediction of where the stock will go from here.

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Meta's social media leadership

Before looking into the future, though, let's consider the Meta story so far. Most of us are familiar with Meta thanks to its social media leadership -- the company owns the world-famous Facebook, Messenger, Instagram, and WhatsApp. About 3.6 billion people use at least one of these every day. And this fact is what's driven advertisers to Meta to promote their products and services, creating a billion-dollar business.

Ads drive revenue at Meta, and this revenue is booming. In the recent quarter, it climbed 28% to $60 billion. All of this has helped the company invest in another area that it sees as a future growth driver, and that's AI.

Meta has rolled out AI features across its apps and offers an AI assistant to users -- the idea here is that this will keep us on the apps longer, and advertisers will pour more and more advertising dollars into Meta to reach us. Meanwhile, Meta aims to use AI to improve ad results, and this is something else that should appeal to advertisers. Finally, Meta's investment in AI could produce additional products and services over time.

This is positive, but Meta has still faced certain headwinds. Some investors have worried that the AI revenue opportunity may not justify current spending levels. In the latest quarter alone, the company's capital expenditures surpassed $31 billion, driven by infrastructure investments.

The federal lawsuit against Meta also may have weighed on some investors' minds as it represented an element of uncertainty -- and a threat to revenue growth. Settling the suit allowed Meta and the states to agree on changes to protect children, such as blocking nighttime usage. But the agreement doesn't order Meta to halt certain features such as targeted ads.

A manageable settlement

Meta faces other unrelated lawsuits, but the settlement of this federal case can still be seen as lowering risk. And the size of the settlement is largely manageable for Meta, a company that generated $200 billion in revenue in the latest full year and that boasts a market value of $1.4 trillion.

Now, let's consider my prediction for the stock. Meta's lackluster stock market performance this year has left the shares trading at 18x forward earnings estimates. This is dirt cheap considering Meta's solid social media moat -- people generally won't switch out of Instagram or WhatsApp since all of their contacts are unlikely to follow -- and ad revenue strength. Meta also offers investors the potential to benefit from AI growth down the road, and this is as the company steadily grows earnings thanks to its social media business.

This makes Meta a fantastic buy right now, particularly for tech investors who have benefited from investments in other AI stocks and are looking to shift into future potential winners. Still, Meta may not take off immediately, as some investors focus on AI spending in general and wait to see whether it translates into revenue growth.

But my prediction is that Meta stock will gradually head higher from these levels over the coming year and into the future -- and that makes it a fantastic stock to buy right now while it's cheap and hold onto for the long term as the AI story develops.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.