An escalating legal battle over allegations that Meta Platforms facilitated addictive behavior in children poses the biggest risk to the already troubled club’s shares. But like Jim Cramer, Bank of America is warning investors not to let the court drama overshadow long-term opportunities. “While stocks are depressed on headlines from the (California) case, we believe the outcome of the current pilot case is just one data point in a multi-jurisdictional litigation process that will likely take years to resolve,” BofA wrote in a note to clients on Monday. Analysts maintained a buy rating on the stock based on the established timeline and Meta’s “compelling valuation” of approximately 16 times estimated 2027 earnings from “growth of AI capability assets.” We also maintained our $810 price target, implying nearly 45% upside from current levels around $560. Mehta is facing a federal lawsuit filed by 29 state attorneys general. The case, which began last week in an Oakland court, could result in billions of dollars in damages and mandatory relief, and could lead to an overhaul of Facebook and Instagram. Testimony is expected from CEO Mark Zuckerberg and other employees. The outcome of this case is important because it could set the tone for other cases pending across the country. The lawsuit added another layer of uncertainty for meta investors in an already difficult year marked by concerns about the level of spending on artificial intelligence and the path to finding returns from those investments. The stock price has fallen 26% in 2026, making Meta one of the worst performers among megacap tech stocks. META YTD Mountain Meta Platform YTD Still, Bank of America outlined several reasons why investors should be wary of extrapolating worst-case scenarios from the California court case. Importantly, the jury’s decision is advisory, meaning the final decision lies with the judge, who can accept or reject the conclusion. Analysts noted that judges have already dismissed some of the plaintiffs’ claims. Bank of America believes that “causality remains an obstacle” because “plaintiffs must link specific platform features to allegations of harm to youth,” suggesting that the link may not be linear. The company also noted that as the trial drags on, “the court may be able to reduce excessive damages through remittances, and the judgment may be overturned on appeal.” The case could go all the way to the Supreme Court. But others on Wall Street see a higher level of risk, likening Mr. Mehta’s case to Big Tobacco in the 1990s, when tobacco companies had to pay billions of dollars for misleading the public about the safety and potential harms of their products. In the years that followed, tobacco companies lost power as lawsuits exposed the threat to public health. Mizuho said it sees “many similarities to the Big Tobacco case” and warned it could face tens of billions of dollars in fines. “The sentiment impact of any significant platform change would be immediate and negative,” analysts said in a note last week, casting doubt on Meta’s ability to grow users over the long term. Instagram and Facebook currently have 3 billion monthly active users, giving advertisers a trove of personal data to target. With more than 90% of its revenue coming from advertising, Meta helps carve out massive audiences through the power of AI-driven ad targeting and AI tools that help businesses create ads. Potential relief is probably a bigger long-term concern than financial penalties, according to Bank of America. Analysts said any judgment or settlement would likely include requirements for changes to engagement features, which could impact the amount of time users spend on Meta’s platform. That’s all speculation at this point, as the California lawsuit does appear narrow in scope. Some of the claims the judge rejected included features such as infinite scrolling and autoplay, leaving the trial to focus on smaller practices such as allowing multiple accounts, filters that change appearance, and tools to manage time spent. As part of its defense, Meta is asserting immunity under Section 230 of the Communications Act, which provides limited federal immunity to providers and users of interactive computer services. Bank of America noted that the case “could test whether Section 230 applies to platform design decisions.” Jim believes Mehta will continue to appeal the unfavorable ruling as the case progresses through the courts, potentially all the way to the Supreme Court, where he believes he will “probably side with the defendants.” As for Meta, he said the litigation risk is “not a good enough reason to sell[Meta]in the long term, even though we can expect these low-level wins to shake up the stock price significantly.” Since the company lost two major cases in late March, its stock price has fluctuated wildly. On March 24, a New Mexico jury ruled that the social media giant intentionally violated consumer protection laws by harming the mental health of children through its deceptive product designs. The next day, a Los Angeles jury found that Meta was negligent and failed to warn users about the mental health risks associated with using the platform. However, we can continue to benefit from the final vindication, or at least some relief on the legal side, and AI, which has the potential to further expand Meta’s business. At the monthly meeting in August, Jim said he “can’t count on selling” Meta stock. That’s because he believes the vast amount of computing power the company is building will eventually serve purposes other than improving social media advertising, turning it into a “premier hyperscaler.” Despite a less-than-stellar earnings report and details still being kept under wraps, Meta last month acknowledged for the first time that it was laying the groundwork for a cloud business that would sell excess computing to external customers. (Jim Cramer’s Charitable Trust is a long META. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. 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