3 Key Risks That Could Drag Down Meta Platforms Stock

Meta Platforms (META) has stumbled before. Its stock has plunged more than 30% within a span of less than 2 months on as many as 4 different occasions in recent years, wiping out billions in market value, and erasing massive gains in a single correction. If history is any guide, META stock isn’t immune to sudden, sharp declines.

Meta Platforms’ stock, having largely surged on buoyant ad revenue and ambitious AI investments for much of 2025, now navigates choppier waters. Despite an overall yearly gain, its recent retreat from summer highs underscores investor apprehension regarding the colossal capital expenditure required for its AI frontier, coupled with intensifying competitive pressures and the uncertain returns from its deep foray into personal superintelligence. This aggressive pursuit of future growth ironically creates a present vulnerability to execution missteps and market impatience.

What Could Send The Stock Crashing?

• Regulatory Risk: Meta faces escalating regulatory pressure, particularly from EU’s DSA/DMA, with fines up to 6% of global revenue (potentially over $9.8B based on 2024 revenue). Jan 2025 policy changes and a Nov 2025 data breach heighten user trust and advertiser brand safety concerns.
• AI Investment Risk: Aggressive AI capital expenditures, projected at $70-72B in 2025, echo past metaverse spending, creating investor skepticism over unclear monetization paths beyond ad tools and potential for depressed returns.
• TikTok Competition: Fierce competition from TikTok for user attention and ad revenue, particularly in short-form video and younger demographics, remains a significant threat to Meta’s core business. Meta counters with Reels and creator incentives.

What’s The Worst That Could Happen?

Looking at META’s risk, it’s clear even strong companies can take big hits in tough times. During the 2018 correction, META fell about 43%. The Covid pandemic slump brought a 35% drop. The inflation shock hit hardest, with a nearly 77% slide from peak to trough. These numbers show that despite META’s strengths, it’s still vulnerable when the market pulls back hard. Even the less severe downturns delivered significant losses, so it’s important to keep that in mind when evaluating risk.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read META Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

Is Risk Showing Up In The Company’s Financials Yet?

Let’s take a look at fundamentals

• Revenue Growth: 21.3% LTM and 17.3% last 3-year average.
• Cash Generation: Nearly 23.7% free cash flow margin and 43.2% operating margin LTM.
• Valuation: Meta Platforms stock trades at a P/E multiple of 31.6

*LTM: Last Twelve Months

If you want more details, read Buy or Sell META Stock.

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