META Stock Slides after Losing Landmark Addiction Case—DA Davidson Calls It a 'Setback'

Shares of Meta Platforms (META) were down by 0.47% in after-hours trading on Wednesday after the company lost a landmark U.S. lawsuit over social media addiction. A Los Angeles jury found Meta and Alphabet's (GOOGL) Google negligent for designing platforms that harm young users. D.A. Davidson's four-star-rated tech analyst Gil Luria called the verdict a "setback" for these tech giants.Claim 30% Off TipRanks PremiumUnlock hedge fund-level data and powerful investing tools for smarter, sharper decisions Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential Luria added that the verdict could stretch through future cases and appeals, but it may eventually push these companies to add consumer protections, which could slow growth. Luria has a Buy rating on META stock with a price target of $850, implying an upside of over 40% from current levels. Backdrop to the Case The case involves Kaley, a 20-year-old who became addicted to Instagram and YouTube as a minor due to features like infinite scroll. The jury found both companies "negligent" in app design and failing to warn users of potential harms. This marks Meta's second major loss this week. On March 24, a New Mexico jury found the company guilty of hiding information about child sexual exploitation risks and the harmful effects of its platforms on children's mental health. The jury fined Meta $375 million for violating safety law. Other defendants, TikTok and Snap (SNAP), settled on confidential terms before the six-week trial began. Meta Liable for $4.2M in Damages A Los Angeles jury ordered Meta to pay $4.2 million and Google $1.8 million. While these amounts are small for tech giants spending over $100 billion annually, the real impact could be much larger. However, the real significance isn't just the money. The ruling could set a legal precedent, opening the door for hundreds of similar lawsuits, forcing changes to app designs, and increasing regulatory and investor pressure. In other words, the long-term effects could be far more costly than the initial payout. Is META Stock a Good Buy Now? While the verdict may affect short-term momentum, the long-term outlook for Meta remains stable. Turning to Wall Street, Meta's shares have a Strong Buy consensus rating on TipRanks, based on 40 Buys and five Holds assigned over the last three months. Furthermore, the average META price target of $865.58 indicates a 45.5% growth potential from its current price.