As Meta sheds $119 billion in market cap, has the stock become 'uninvestable'?

MW As Meta sheds $119 billion in market cap, has the stock become 'uninvestable'?

By Christine Ji

The Facebook parent company faces new regulatory risks that are sparking fears of a Big Tobacco-style crackdown. But investors may be overreacting.

For the first time since September 2024, Meta has slipped to the eighth spot among U.S. companies by market capitalization.

Shares of Meta Platforms faced their steepest selloff of the year on Thursday, with recent social-media lawsuits targeting the company joining a laundry list of investor conditions.

Meta's stock (META) fell 8% on Thursday, closing at its lowest level since April of last year. At $545.75, the stock has tumbled 30% from its peak of $790 back in August.

The drop erased $119 billion from Meta's market capitalization - knocking the Facebook parent down to eighth place in the ranks of the largest U.S. companies, behind Tesla $(TSLA)$, according to Dow Jones Market Data. It's the first time since September 2023 that Meta has sat this low on the corporate market-cap leaderboard.

Investors have been spooked by recent lawsuits in New Mexico and California that have injected uncertainty into the social-media regulatory landscape. Back-to-back rulings this week found Meta liable for factors such as failing to protect children from exploitation and operating addictive platforms. In the New Mexico case, Meta was ordered to pay $375 million. The California decision imposed a combined $6 million payout for both Meta and Google $(GOOGL)$ $(GOOG)$.

The implications extend beyond the monetary damages. Some speculate that the rulings could open the door to an intense regulatory crackdown on social-media companies, similar to the historic tobacco settlements of the 1990s. Meta and other social-media companies face thousands of similar cases in California alone, according to Reuters.

The rulings could be a widespread cloud over digital-advertising businesses, Jefferies equities analyst Jeffrey Favuzza wrote in a Thursday note.

While Evercore ISI analyst Mark Mahaney acknowledged the risk from the rulings, he thinks the panic is overblown. "Is Meta univestable today? It's possible, but we think unlikely," Mahaney wrote on Thursday. "Arguably unlike Big Tobacco, social media provides a variety of positive social benefits as a communication, entertainment, information and connectivity tool."

Mahaney flagged that Meta is now trading at 16 times forward earnings, within 10% of its three-year low. He maintained his outperform rating and $900 price target on the stock.

Read on: Is Meta's stock a steal? Why a new bull sees big gains ahead.

Meta has also struggled to establish itself as a top AI player compared to competitors such as Google, Anthropic and OpenAI, despite aggressively poaching top talent to form Meta Superintelligence Labs last summer. The release date of Meta's newest AI model, dubbed "Avocado," has reportedly been pushed back from March to May.

Meta may also have encountered a road bump with its $2.5 billion acquisition of the Singaporean AI startup Manus, as that company's Chinese co-founders have reportedly been put under a de facto exit ban while Chinese regulators review the deal for potential national-security and technology-export violations.

In recent months, Meta has been shuttering its metaverse initiatives that were under its Reality Labs division, instead concentrating resources on more mainstream AI. The company is also reportedly considering a 20% cut to its workforce in the near future.

At the same time, Meta recently revealed a high-stakes stock-option program for top executives, which will only be fully realized if the company surpasses a $9 trillion valuation by 2031. That's a far climb from its current level near $1.4 trillion.

See more: Meta may lay off 20% of staff while making two big statements about AI

-Christine Ji

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March 26, 2026 17:08 ET (21:08 GMT)

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