70% Downside For META Stock?

Question: How would you feel if you owned Meta Platforms stock (NASDAQ:META) and it crashed 60%, or even 80%, in the next few months? Sounds extreme? It’s happened before – and it could happen again. Meta has displayed greater stability so far this year, maintaining share prices similar to January levels, while the NASDAQ index has dropped approximately 10%. Recently, the stock has faced pressure after President Trump’s comments left open the possibility of a recession, generating investor uncertainty. Additionally, investor worries have increased with the emergence of Manus, a new AI assistant from China, intensifying competition in the sector.

The escalating economic worries in the United States, triggered by President Trump’s tariff implementation, are creating an unfavorable environment for markets overall. We think META stock could fall further to levels as low as $200 per share. Here’s why investors need to be concerned.

Here’s the thing: In a downturn, META stock could lose considerably. There is evidence from as recently as 2022 that META stock lost over 70% of its value in the matter of just a few quarters. So, could META’s  roughly $600 stock slide to under $200 levels if a repeat of 2022 were to happen? Now, of course, individual stocks are more volatile than a portfolio – and in this environment, if you seek an upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.

Why Is It Relevant Now?

While META’s AI investments are showing returns through higher user engagement, investors were underwhelmed by the company’s quarterly forecast. Meta continues making massive infrastructure investments to support its AI initiatives, with 2025 capital expenditures projected at $60-65 billion. Despite DeepSeek’s AI model potentially reducing computing requirements, Meta’s leadership believes significant resources are still necessary for running AI models, justifying continued heavy infrastructure investment. However, DeepSeek’s advancements and the new Manus release suggest powerful AI models might be developed at lower costs, intensifying competition and pressuring Meta to evolve its AI technologies like Llama.

From a macroeconomic perspective, President Trump’s trade policies could negatively impact META. The administration has doubled Chinese import tariffs from 10% to 20% on top of existing levies, and Trump recently proposed a “25% or higher” tariff on all imported semiconductor chips. These policies could further increase Meta’s already substantial AI infrastructure costs. Additionally, reduced consumer spending resulting from tariff-driven price increases may hurt advertising-dependent businesses, potentially undermining Meta’s revenue streams.

How resilient is META stock during a downturn?

META stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• META stock fell 73.7% from a high of $338.54 on 3 January 2022 to $88.91 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 20 November 2023
• Since then, the stock has increased to a high of $736.67 on 17 February 2025 and currently trades at around $6o0

COVID-19 Pandemic (2020)

• META stock fell 32.9% from a high of $217.49 on 19 February 2020 to $146.01 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 20 May 2020

Premium Valuation

In summary, it also doesn’t help that META stock is still expensive; it trades at almost 25x trailing earnings. Sure, Meta Platforms’ Revenues have grown considerably over recent years, rising at an average rate of 12.2% over the last 3 years (vs. 9.8% for S&P 500). However, this growth could fade quickly if the economy takes a turn for the worse.

Given this growth deceleration and the broader economic uncertainties, ask yourself the question: do you want to hold on to your META stock now, will you panic and sell if it starts dropping to $400, $300, or even lower levels? Holding on to a falling stock is never easy. Trefis works with Empirical Asset Management — a Boston area wealth manager — whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

[1] Returns as of 3/11/2025
[2] Cumulative total returns since the end of 2016

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