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Shares of Facebook parent company Meta fell more than 4% on Friday, showing rare vulnerability for the powerhouse stock after some landmark court rulings and the fallout of its much-hyped Metaverse and another delay in its AI model.
Back-to-back historic court losses further hurt Facebook’s parent company’s stock.
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important facts
Meta shares fell 4.3% on Friday afternoon after falling 7.96% on Thursday and are down 19.4% over the past year, the worst performance among the “Magnificent Seven” stocks.
A California jury found Meta and Google guilty on Wednesday responsible Meta founder Mark Zuckerberg testified that the company was “building this thing as a cool thing that has value in people’s lives.”
This came a day after the New Mexico jury Government Meta enabled child exploitation on its platform, and the company was ordered to pay $375 million in damages for violating state consumer protection laws.
Two weeks ago, The New York Times informed Meta delayed the release of Avocado, its foundational AI model, until at least May after it failed to outperform AI models from rivals Google, OpenAI and Anthropic in benchmark tests (Meta’s shares fell 3.8% the next day).
Immediately thereafter, Meta Said It will discontinue access to Horizon Worlds on its VR headsets starting June 15, signaling a broader pivot from the $80 billion metaverse product that once rebranded the entire company — though the meta went back Some decisions the next day “to support the fans who have arrived.”
Meta’s ‘watershed’ court losses compared to the fall of Big Tobacco
Meta’s California case is one of thousands of lawsuits the company, TikTok, YouTube and Snap have faced in state and federal courts, according to the Wall Street Journal. informed. Legal experts told the Journal that the ruling against Meta and Google could lead to massive litigation that could last for years, similar to the legal campaigns against the tobacco industry in the 1990s. Harvard Law School lecturer Timothy Edgar told cnbc The decisions represent a “major watershed event” that represents “a major shift in how Americans are viewing Big Tech.”
Avocado: The latest delay in Meta’s $135 billion AI bet
zuckerberg claimed In 2024 Meta’s AI models will become “the most advanced in the industry” and “bring the benefits of AI to everyone”, suggesting that Meta’s Llama was “already a leader in openness, modifiable, and cost efficiency.” The company has only increased its bet on AI in the past two years, saying in January it expected to spend up to $135 billion in 2026, nearly double the $72 billion it spent last year, as it increased investment in its “superintelligence” unit. In November, Meta announced It will invest $600 billion in AI infrastructure in the US by 2028. It also invested $14.3 billion in scale AI to lure founder Alexander Wang to become Meta’s new chief AI officer, but as it increased spending, many of Meta’s A.I. researcher left the company including yan lekanWho led Meta’s AI research division for over a decade.
Meta’s $80 billion Metaverse bet that didn’t pay off
Facebook rebranded itself as Meta in 2021 as a bet on its metaverse, which the company created Call The “successor” to the Internet. Metaverse relied on Meta’s VR and artificial reality products, although demand never met expectations, as the project cost the company about $80 billion. Meta had aimed to reach 500,000 monthly active users by the end of 2022, but that number fell below 200,000, according to the Journal informedCiting internal documents. Meta has since reduced spending on the metaverse. Allegedly The project’s budget is planned to be cut by 30% in 2026 amid changes in AI. Mike Proulx, research director at market research firm Forrester, said wired Meta’s move from the metaverse to AI was “the predictable and inevitable result of a big, risky bet that never found an audience.”
Meta’s regulatory disputes: antitrust cases and record fines
Meta has been involved in several regulatory and legal disputes since 2020. That year, the Federal Trade Commission filed an antitrust lawsuit against Meta, claiming the company established a social media monopoly by acquiring Instagram and WhatsApp (a federal judge ruled that against FTC in November). A whistleblower complaint in 2021 claimed The company implemented security measures on Facebook before the 2020 presidential election to prioritize user safety over growth and engagement, but later rolled back those updates, which allowed misinformation to spread on the platform. In 2022, Meta was ordered to pay a fine of €277 million ($319 million) by Irish regulators for breaching privacy standards, before later agreeing to pay $725 million over claims it allowed third parties, including Cambridge Analytica, to access user data. In May 2023, the European Union issued its largest-ever fine under digital privacy law by ordering Meta to pay €1.2 billion ($1.3 billion) for transferring European user data to the US.
What Makes Meta So Profitable: Social Advertising
Meta has the lowest forward price-to-earnings ratio at 19.88 — meaning an investor would have to pay less than $20 to earn $1 of the company’s expected profit next year — among the “Magnificent Seven” stocks, just below Microsoft (20.08) and Nvidia (21.46), suggesting Meta’s stock is comparatively better value. Jefferies analyst Brent Thill wrote in a January note that, despite criticism of the impact of AI spending on shares of other tech companies, Meta’s stock was already priced into “extreme pressure” and that its potential upside far outweighed the risks. The company’s main revenue stream, advertising, has also remained strong over the years: Meta Generated $196.1 billion Last year, advertising revenue – generated by its giant social platforms, especially Facebook and Instagram – is expected to increase by 22% from 2024 ($160.6 billion), 32% from 2023 ($131.9 billion) and 42% from 2022 ($113.6 billion). Ad impressions on Meta’s platform grew 12% last year, with a 7% increase for daily active users in December.
What other events affect Meta’s stock?
Whenever Meta’s advertising is disrupted, the company’s stock takes a hit. After Apple announced changes to its iOS operating system in 2020 that limited advertisers’ access to user data, Meta said an update is due in February 2022. $10 billion Loss in revenue. This caused Meta’s shares to fall 26.3%, the biggest one-day loss for the stock in the last decade. Further losses widened after Meta reported a loss in sales from advertising revenue for the first time in July 2022, and shares fell to their lowest ever level. 2016 After Meta reported a loss of $9.4 billion from its Metaverse project.
