Metaplatform’s slump has been exacerbated by two social media court losses this week, which could present a buying opportunity. Meta shares fell more than 8% on Thursday after a Los Angeles jury late Wednesday found the company (and Google’s YouTube) negligent in a lawsuit brought by a woman who said she became addicted to the app as a child. A total of $6 million in damages was awarded, of which Meta was to pay 70%. On Tuesday, a jury in Santa Fe, New Mexico, found Meta liable for $375 million in civil damages for violating the state’s consumer protection law. Meta said it would appeal the Santa Fe ruling and consider its options in the California case. (Google’s parent company Alphabet said it would appeal the California ruling.) “If you decide to sell meth because it looks like it could be a cigarette, it’s not a cigarette,” Jim Cramer said on CNBC Thursday, citing years of Big Tobacco litigation and subsequent government regulation of the industry as an unlikely outcome for Big Tech. “Tobacco has been hiding it for years,” Jim said, arguing that tech companies have been “pretty open” about the risks of their social platforms. Meta was the worst performer among mega-cap tech stocks in March, dropping more than 15%. Jim added that investors “will regret” selling Meta stock, noting that next month’s profits could be bigger and CEO Mark Zuckerberg could announce further job cuts. Either one can cause a bull market. “We are very close to needing to buy stock,” Jim told club members, viewing the recent decline in stock prices as a way to get more stock at a discount. The company’s stock currently trades at a forward price/earnings ratio of 18 times, compared to an average of 23 times over the past five years. META YTD Mountain META Stock Performance YTD. What’s at stake? This week’s ruling against Mehta challenges long-standing legal protections under Section 230 of the Communications Decency Act, which has historically shielded social media companies from liability related to user-generated content. The California case marks the first time a jury has treated a social media platform as a defective product designed to exploit young users. The Wall Street Journal reports that more than 3,000 similar lawsuits are pending in California courts. Jim recalled the flurry of talc lawsuits against his former club stock, Johnson & Johnson, and said he didn’t want to see plaintiffs swarm tech companies. “That’s what[lawyers]do. They shop around, find someone they think they can win, and then they collect signatures from different people and file big tort lawsuits and make a lot of money,” explained Jim, who graduated from Harvard Law School in 1984 but went straight to Wall Street without becoming a lawyer. “Whether it’s asbestos or what happened with J&J with talc, it’s been a pattern,” he said, suggesting that Meta and other tech companies are being targeted “because they have a lot of money.” Indeed, Jim warned that investors should prepare for volatility in Meta stock if events continue. From a financial perspective, Bank of America estimates that teenage users account for about 1% of Meta’s revenue, suggesting that even if younger usage declines, exposure will be limited. But an avalanche of verdicts against the company could lead to mandatory bailouts and penalize the company far beyond its revenue basis. In conclusion, Jim generally endorses the optimistic view that Meta is positioned for growth as CEO Mark Zuckerberg continues to make aggressive long-term bets and decisive changes at the company in the age of AI. This includes a new pay structure tied to stock performance, which could potentially benefit executives if stock prices explode over the next few years. Meta this week announced hundreds of layoffs across several divisions, including its Reality Labs division. Jim said that while “the optics aren’t great,” the move is consistent with Meta’s history of tightening costs in uncertain economic times. “Yes, he fired some people. Should we think that’s a bad thing? Every time he fires someone, he’s making even more money.” At the same time, Mehta is also increasing spending in other areas. The company expects capital spending of $115 billion to $135 billion this year, primarily related to building AI infrastructure. The main pressure on stocks so far this year has been a surge in spending, even more than legal battles. Jim has said in the past that Mehta and the rest of the mega-cap stocks must keep spending to avoid being left behind on AI. The club maintains Meta’s rating of 1, the equivalent of a buy, and its price target of $825 per share. (Jim Cramer’s Charitable Trust is long META, GOOGL. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, you’ll receive trade alerts before Jim Cramer makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. 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