Oh, how the mighty have fallen. Shares of Meta Platforms (META -0.43%) are down 50% year to date. The parent company of Facebook and Instagram has endured numerous challenges in 2022, ranging from macroeconomic headwinds to insults from the Kardashians. 

What's more, this year's perfect storm shows little sign of fading; some think it's only the start. So what are investors to do? Let's have a look at the bear and bull case for Meta and see what's really happening at the world's largest social network.

Person in a suit using a VR headset.

Image source: Getty Images.

Bear case: There are challenges everywhere

Meta's second-quarter earnings in two words: not good.

The company announced a veritable trifecta of bad news:

Management blamed both macro issues and company-specific challenges. On the macro front, the company pointed to the lingering effects of privacy changes by Apple and overall weakness in the digital advertising market.

Meanwhile, Meta addressed the elephant in the room by noting increased competition from TikTok, which is rapidly gaining market share. What's more, the company noted that its Reels platform is underperforming its other product offerings like Instagram Stories and Facebook News.

To make matters worse, the company appears to have backtracked on plans to roll out a new update to Instagram. The changes -- which filled users' feeds with algorithmically selected viral videos rather than posts from within a user's follower network -- were bashed by Instagram superusers Kylie Jenner and Kim Kardashian. 

Jenner and Kardashian, the second- and seventh-most-followed users on Instagram, with more than 600 million followers combined, slammed Instagram's update as a knockoff of TikTok. Instagram quickly reversed course, showing how much power mega-influencers can exert on the platform.

But the bad news for Meta doesn't end there. The company is still pouring cash into its Reality Labs segment. In the second quarter, the unit posted a $2.8 billion loss with only $452 million of revenue.

In a nutshell, the bear case for Meta is clear: The company is trying to find new areas of growth (Reels, Reality Labs, etc.), but, so far, the market is unimpressed with the results. 

Bull case: Meta remains extremely profitable

The bull case for Meta rests on two key pillars: profits and growth.

With all the negative sentiment floating around Meta, it's easy to forget how profitable the company is. It generated over $119 billion of revenue over the last 12 months and converted $33.6 billion into net income from operations. That's far from a disaster.

As for growth, Meta is investing heavily in its Reality Labs segment -- an area that holds enormous promise if the company can pull it off. With close to 3 billion monthly active users (MAUs), Meta's scale is something that few companies in the world can match. If it can execute on its plans to build (and sell) the metaverse, Meta's revenue growth will return -- and its stock price should soar.

Moreover, the company is still buying its own stock hand over fist. With ample cash flow to cover stock buybacks, you have to wonder: How much lower can the stock really go? 

META PE Ratio Chart.

META PE Ratio data by YCharts.

Shares are already down 50% this year, and Meta is breathtakingly cheap on a valuation basis. Its trailing price-to-earnings multiple is a scant 12.2. While the company's growth might be drying up, Meta could have a bright future as a value stock.

Steer clear of Meta for now

Call me skeptical when it comes to Meta's strategy. I have little doubt that the company's legacy platforms (Facebook, Instagram) have value and will continue to generate profits for years to come. After all, having a third of Earth's population as users on your platform must have value. 

However, the trouble is that these profitable, older segments are combined with a speculative enterprise (Reality Labs) that is hungry for cash and will likely drag down Meta's profitability for years or even decades. For that reason, I think Meta is a name to steer clear of -- at least for now.