Gary Black Sees META Stock Underperform S&P 500 As $1.4 Trillion ‘Tobacco-Like’ Legal Overhang Looms

Black said META stock looks cheap at 15.6 times 2026 adjusted earnings against more than 15% long-term growth.

• Gary Black expects Meta stock to underperform the S&P 500 while the legal case remains unresolved.
• Black compared Meta’s legal exposure with tobacco litigation, which weighed on cigarette stocks for years.
• According to him, Meta lacks the ability to pass litigation costs to users the way tobacco companies could.

Gary Black, managing partner at Future Fund, said Monday that he expects Meta Platforms (META) to continue underperforming the S&P 500 in the near term, with a potential $1.4 trillion legal judgment hanging over the Facebook parent.

Black compared Meta's legal exposure to the tobacco industry's litigation experience, saying years of lawsuits could weigh on the stock even if the company's underlying business remains strong.

META stock moved 0.40% higher in pre-market trade after closing at around $550 on Friday.  According to Black, META is trading cheaply at 15.6 times 2026 adjusted earnings per share (EPS) against more than 15% long-term earnings growth. 

According to him, a settlement in the "few hundred billion dollar" range could send the stock higher, but cautioned that even a settlement wouldn't be the end of the story, warning that "other litigation will surely follow."

How Is Retail Feeling About Meta’s Trial?

On Stocktwits, retail sentiment around the Facebook-parent fell to ‘neutral’ from ‘bullish’ territory over the past day and chatter trimmed to ‘normal’ from ‘high’ levels.  

Some retail traders on the platform echoed Black’s view that the “lawsuits hanging over the company” were weighing on outlook.

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Others were more bullish, forecasting that META stock would rally back to record highs of over $700 by December-end.

View this Stocktwits post

Why Meta Faces Upto $1.4 Trillion In Potential Damages 

Meta is being sued by California and a multi-state coalition of attorneys general who allege the company designed Facebook and Instagram to be addictive to children and teens, improperly collected their data, and misled the public about platform safety. 

The trial is being heard in federal court in Oakland before U.S. District Judge Yvonne Gonzalez Rogers. An advisory jury will hear evidence and issue a verdict, but the judge holds ultimate authority over liability, penalties, and remedies. 

Black expects the case to overhang Meta's stock until that verdict lands in October. Any appeal would go to the Ninth Circuit Court of Appeals, which Black said is one of the more liberal federal circuits and that he sees as adding further downside risk for Meta rather than offering relief.

Meta Faces More Than One Legal Precedent

Black pointed to recent precedent as a reason for concern. This spring, Meta and Google's (GOOGL) YouTube lost a landmark social media case in California, where a jury found both companies liable for harming a young user through certain app design features and awarded her $6 million. 

Earlier this month, Meta was separately ordered to pay more than $940 million in New Mexico after being found a public nuisance that caused psychological harm to children. In the current Oakland case, plaintiffs are seeking compensatory and punitive damages that could total $1.4 trillion, a figure Black notes is essentially equal to Meta's entire market capitalization.

Gary Black Compares Meta’s Legal Risk To Big Tobacco 

In comparing Meta’s legal troubles to the tobacco industry, Black stated that tobacco stocks eventually recovered once investors realized companies could price future litigation costs directly into every pack of cigarettes, with addicted customers absorbing the cost. 

Meta, on the other hand, has no equivalent mechanism to pass litigation costs onto users the way a per-unit price increase works for a physical product. That leaves Meta more exposed to an open-ended legal overhang than tobacco companies ultimately were, according to Black.

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