Meta Platforms (NASDAQ: META) faces significant legal challenges following rulings in New Mexico and California, leading to a steep decline in its stock. The company will pay $375 million in civil penalties in New Mexico for misleading consumers about platform safety and endangering children, while a California jury ordered Meta to pay $4.2 million in a social media addiction case, attributing 70% of the liability to Meta. The day after the California verdict, Meta’s stock dropped nearly 8% compared to a 2% decline following the New Mexico ruling.
The California case, deemed a “bellwether,” sets a worrying precedent that may expose Meta to thousands more similar lawsuits. With around 2,000 pending cases potentially invoking this new legal interpretation, Meta could face up to $8.4 billion in damages if each results in a $4.2 million payout. This comes at a time when Meta is expected to spend between $115 billion and $135 billion in capital expenditures to support its AI initiatives. Investor sentiment is strained, but Morgan Stanley’s Brian Nowak recently named Meta his “top pick,” lowering the price target by 6% to $775, suggesting a 30% upside despite the current uncertainties.
