Meta Platforms started the year as the standout Big Tech stock, but concerns over legal risks and heavy AI investments have surfaced, leading to last week’s 11 per cent drop.
Shares of the parent company of Facebook and Instagram have fallen 19 per cent this month, on track for their worst monthly performance since October 2022, when Meta issued a disappointing revenue forecast and CEO Mark Zuckerberg urged investors to remain patient with the company’s soaring metaverse spending.
Meta is now shifting its focus from the metaverse to AI, but worries over excessive spending are intensifying.
The company also faces mounting existential risks: a New Mexico jury found Meta misled teenagers about the safety of its social networks, and both Meta and Alphabet were held liable in a social-media addiction trial. In March alone, Meta’s stock has lost $310 billion in market value.
Wall Street is now weighing the possibility that social media companies could face a decline similar to the tobacco industry after stricter regulations, though many analysts caution that it’s too early to draw conclusions.
“I don’t necessarily see this as the same as tobacco, but stranger things have happened,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, which has about $11 billion in assets and owns Meta shares.
He began his analyst career covering the tobacco industry, spending considerable time assessing potential litigation risks.
“Some would say the only way to remove any negative impact of social media is if you shut the whole thing down,” Ghriskey said. “Obviously that would just devastate the company.”
Meta faces far greater risk than Alphabet, whose exposure is mostly tied to YouTube. Nearly all of Meta’s revenue comes from advertising across its “Family of Apps.”
Yet Wall Street remains largely bullish: of 80 analysts covering Meta, tracked by Bloomberg, 72 rate it a buy and just one issues a sell.
Based on average price targets, the stock is projected to rise 64 per cent over the next 12 months—the strongest expected return since 2022.
