Why Meta Platforms Fell in March

Shares of Facebook and Instagram owner Meta Platforms (NASDAQ: META) fell 11.7% in March, according to data from S&P Global Market Intelligence.

Meta came under the same pressure as many technology stocks did last month, amid concerns about high spending on AI infrastructure, the outbreak of war with Iran, and a rise in oil prices.

However, Meta faced an additional headwind toward the end of the month, losing two high-profile court cases that may lead to further penalties or limitations on its core platforms.

Losses in court, in both New Mexico and Los Angeles

The week of March 23, Meta lost two high-profile court cases relating to the safety of its platforms. First, a New Mexico court ruled that Meta had inadequately policed its Facebook and Instagram sites, and in so doing, failed to protect children from online predators. Then, in a Los Angeles court, a jury found both Meta and Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) YouTube to be negligent in policing user addiction, saying the platforms were liable for a female plaintiff's mental health problems.

The decisions weren't overly expensive for a $1.5 trillion giant like Meta: the New Mexico court imposed a $375 million penalty, and the L.A. court imposed a $6 million penalty for the individual plaintiff, of which Meta was liable for $4.2 million.

However, these losses could be a harbinger of future lawsuits with a similar bent. According to some analysts, future suits could add up to "single-digit" billions for Meta. Furthermore, these cases may lead to more legislation or regulation of Meta's platforms. Several countries are considering banning social media for minors, with Australia becoming the first country to pass restrictions on social media for teens under 16 back in December. Other countries across Europe and East Asia are contemplating similar measures.

Such laws or mandates could limit engagement on Meta's social media platforms, thereby directly affecting revenue and earnings.

Image source: Getty Images.

But Meta's stock now seems cheap, even with these risks

While these headlines are no doubt worrisome, investors should keep in mind that Meta Platforms has endured numerous business and regulatory challenges over its life, and has always found a way to thrive on the other side. The company will likely appeal these lawsuits, and the cases could take years to conclude in higher courts.

Meanwhile, following March's decline, Meta's stock appears quite cheap today. In 2025, Meta reported $83.3 billion in operating profits; however, its investment in its Reality Labs virtual reality project resulted in a $19.2 billion loss. Without that discretionary spending, which Meta could cancel at any time, Meta's core social media platforms generated a whopping $102.5 billion in operating profit, up 17.7% from 2024.

At its current $1.45 trillion valuation, Meta is trading at just 14.2 times that core social media operating profit. That's an incredibly cheap valuation for a dominant platform business with strong network effects, especially one growing in the high-teens.

Therefore, investors should probably look through these ugly headlines. After all, the past periods when Meta received bad headlines have usually been great buying opportunities, with the benefit of hindsight.

Billy Duberstein and/or his clients have positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.