Social media giant Meta Platforms (META -0.23%) recently reported earnings for its 2021 fourth quarter, and the results shocked investors enough to sell the stock down more than 20%. Meta was a $900 billion company when earnings came out; you rarely see stocks this big make such a dramatic move.

But the earnings report sent a clear message that the business is changing. Is change good? The market's reaction doesn't seem to think so, but things might not be what they seem. Here are three major takeaways from the quarter that could clue investors in on whether Meta is a buy or not.

1. Privacy changes are hurting the ad business

In the spring, Apple launched changes to its iOS platform to limit how digital advertisers tracked and targeted iPhone users. If you have an iPhone, you have probably seen this; apps will ask you to opt into being tracked. Users can opt out of being tracked, making Meta's advertising platform less effective. The company began to feel its impact in its 2021 Q3, but management revealed the full scope of its effect in Q4.

Person recording a video for social media.

Image source: Getty Images.

CFO David Wehner revealed 2022 Q1 revenue guidance that called for growth of just 3% to 11% year over year, a potentially shockingly low guide considering the company's revenue just grew 20% year over year in 2021 Q4.

While management mentioned competition from apps like TikTok, Apple's iOS changes are a big culprit for the low guidance. The changes weren't yet in place for the first half of 2021, creating tough comparables for the first two quarters of 2022. Wehner estimated that iOS would cost Meta roughly $10 billion in ad revenue this year.

Meta spends a ton of money on research and development, so I wouldn't be surprised to see the company eventually find a workaround for the iOS challenges. However, it's having a significant impact on Meta's short-term operations.

2. Meta is stepping up investments in the metaverse

This quarter was the first under Meta's new reporting structure, where it pulled its social media platforms and metaverse segments apart, showing how they each stand on their own. The metaverse segment, or "Reality Labs," which contains Oculus, showed significant operating losses.

Reality Labs segment revenue grew to $877 million, a 22% year-over-year increase, but lost $3.3 billion; the division is receiving heavy investments and probably won't be profitable for a while. Expenses increased due to higher R&D spending, which Mark Zuckerberg made clear was coming when he announced the company's name change to Meta.

Meta is intentionally moving beyond being a social media company, so owning the stock means that you are buying into the company's metaverse plans. The company generated $12.5 billion in free cash flow in Q4 2021, a 35% year-over-year increase, even with the additional spending. As the chart shows, Meta is spending a lot of that on buying back shares, which only becomes more effective at a lower share price, because the same amount of money can take more shares off the market, helping boost earnings per share.

FB Stock Buybacks (TTM) Chart

FB Stock Buybacks (TTM) data by YCharts

3. Has Facebook peaked?

Facebook's daily active user count declined for the first time in 2021 Q4, although slightly, falling to 1.929 billion from 1.930 billion the prior quarter. The social media platforms are Meta's cash cow, so the thought of a potential decline could alarm investors. But it's also important to consider that Meta collectively has 2.82 billion daily active users across its family of apps like Facebook, Instagram, and WhatsApp, and 3.59 billion people use the apps monthly.

There are 7.9 billion people in the world, so it seems fair that Meta's networks have become so large that it will become harder to pick up new users at some point. Generating more revenue per user seems like a more critical metric now, and the average revenue per Facebook user grew to $11.57 in Q4 2021, a 14% increase from Q4 2020. Investors will want to keep an eye on user metrics to ensure that, at worst, user growth plateaus instead of accelerating user losses.

Is the stock a buy?

Meta looks like a company in a transition period; its social media networks aren't delivering the type of growth that investors might have come to expect. Still, Meta is about as close to being a social media monopoly as you can get, and the business is generating more free cash flow each quarter than most companies do as revenue in a year.

The stock now trades at a price-to-earnings ratio of just 17, which seems like a bargain for a company with the global reach and massive free cash flows that Meta produces. Even if top-line growth slows for a few years as Meta builds up Reality Labs, the company's share buybacks could help generate solid earnings growth for investors.

Meta is a company that needs to prove itself as it changes directions toward the metaverse, but if you buy the story behind it, it's hard not to like the stock at this price.