Investor Concerns Grow Over the Potential for Meta Stock Decline

Question: How would you feel if you owned Meta Platforms Stock (NASDAQ:META) and it dropped by 60% or even 80% within a few months? While this may sound extreme, it has happened before and could happen again. Meta has shown relative stability in 2023, with share prices hovering near January levels even as the NASDAQ index has seen a decline of roughly 10%. However, recent comments from President Trump suggesting a looming recession have created investor anxiety. On top of that, the introduction of Manus, a new AI assistant from China, has heightened competition in the tech sector.

The current economic climate in the United States is turbulent, largely due to Trump’s tariff policies, which are having an adverse effect on the overall market. Analysts predict that META Stock could face further declines, potentially dropping to around $200 per share. Here’s why investors should take caution.

Evidence of Potential Declines

When it comes to downturns, META Stock has shown a tendency to lose significant value. For example, in 2022, META Stock plummeted by over 70% within just a few quarters. If another downturn similar to 2022 were to occur, could its share price, currently around $600, fall below $200? It is essential to note that individual stocks often face more volatility compared to diversified portfolios. For those looking for risk management, a High-Quality Portfolio might be a suitable alternative, having outperformed the S&P 500 with returns exceeding 91% since its inception.

Current Relevance

Currently, while Meta’s investments in AI are resulting in increased user engagement, the company’s quarterly forecast has not met investor expectations. Meta continues to invest heavily in infrastructure to support its AI projects, with anticipated capital expenditures for 2025 estimated between $60 billion to $65 billion. Although DeepSeek’s AI model has the potential to lower computing demands, Meta’s leadership acknowledges that substantial resources are still required to operate AI models efficiently. The advancements from DeepSeek and Manus raise concerns about heightened competition, compelling Meta to enhance its technologies like Llama.

On a macroeconomic level, President Trump’s trade policies could adversely influence META. His administration has raised Chinese import tariffs from 10% to 20%, and he recently suggested imposing tariffs of “25% or higher” on all imported semiconductor chips. These tariffs may further inflate Meta’s significant infrastructure costs related to AI. Moreover, reduced consumer spending stemming from these tariff-induced price hikes could adversely affect advertising-driven revenues for Meta.

Assessing META Stock’s Resilience

Historically, META Stock has performed worse than the benchmark S&P 500 during downturns. Investors are hoping for a soft landing for the U.S. economy, but what happens if the economy faces another recession? Our dashboard, “How Low Can Stocks Go During A Market Crash,” details how major stocks performed during and after the last six market crashes.

Inflation Shock (2022)

• META Stock dropped 73.7% from a high of $338.54 on 3 January 2022 to $88.91 on 3 November 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500.
• The Stock fully recovered to its pre-crisis peak by 20 November 2023.
• Since then, the Stock reached a high of $736.67 on 17 February 2025 and currently trades around $600.

COVID-19 Pandemic (2020)

• META Stock fell 32.9% from a high of $217.49 on 19 February 2020 to $146.01 on 16 March 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500.
• The Stock fully recovered to its pre-crisis peak by 20 May 2020.

Premium Valuation Concerns

Overall, it is important to note that META Stock remains expensive, trading at nearly 25 times trailing earnings. While Meta Platforms has experienced impressive revenue growth at an average rate of 12.2% over the last three years—outpacing the S&P 500’s 9.8%—this growth may rapidly diminish if the economic environment worsens.

Given the potential for slowing growth and broader economic uncertainties, consider this: do you want to retain your META Stock, or do you fear panic selling if the price declines to $400, $300, or lower? Holding onto a falling Stock is always challenging. Trefis collaborates with Empirical Asset Management—a wealth manager based in the Boston area—whose asset allocation strategies delivered positive returns during the 2008-09 crisis when the S&P fell over 40%. Empirical has integrated the Trefis HQ Portfolio into its asset allocation framework to offer clients potentially superior returns with reduced risk compared to benchmark indices, diminishing volatility as evidenced by HQ Portfolio performance metrics.

Returns	Mar 2025 MTD [1]	2025 YTD [1]	2017-25 Total [2]
META Return	-6%	7%	446%
S&P 500 Return	-6%	-5%	151%
Trefis Reinforced Value Portfolio	-4%	-5%	643%

[1] Returns as of 3/11/2025
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.