It has been a terrible year for Meta Platforms (META -2.15%), with shares tumbling more than 70% year to date. The social media company has lost $660 billion in value -- roughly equivalent to the total market cap of Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B).

So, with Meta reeling from another lousy earnings report, is it time for investors to buy or sell? Let's review three things smart investors know about Meta for some answers.

Close-up of a $100 bill.

Image source: Getty Images.

1. Building the metaverse is (too?) expensive

It's clear that Meta Chief Executive Officer (CEO) Mark Zuckerberg has gone all-in on the metaverse. He has given presentations from the metaverse and he has spent over $36 billion on metaverse research and development (R&D). Zuckerberg has even changed the name of the company from Facebook to Meta Platforms in order to better reflect his vision.

Yet, it seems some investors didn't really believe Zuckerberg had gone all in -- until this year. As the bills for the metaverse have come due, Meta's share price has tanked. 

META Research and Development Expense (% of Quarterly Revenues) Chart.

META Research and Development Expense (% of Quarterly Revenues) data by YCharts.

As you can see above, Meta's R&D costs (as a percentage of revenues) have skyrocketed in 2022 -- jumping from a three-year average of around 23% to 33% in the most recent quarter (the three months ending Sept. 30, 2022).

2. R&D expenses are eating away at Meta's profitability and free cash flow

Until now, the high costs of bringing Zuckerberg's dream to life seemed tolerable for many investors -- a worthwhile investment that could pay off at some point down the road. 

However, Meta's recent earnings results paint a different picture. Meta's overall fundamentals have deteriorated. Lower overall ad spending and competition from TikTok are hurting the core Facebook and Instagram businesses. Meanwhile, the enormous R&D expenses in the Reality Labs unit are driving down Meta's net income, operating margin, and free cash flow. In less than a year, Meta's free cash flow has collapsed from $12.8 billion to only $317 million -- its lowest level in over a decade. 

META Chart.

META data by YCharts.

3. Buying shares of Meta means placing your faith in Mark Zuckerberg

Unlike many public companies, Meta has a two-tiered shareholder structure -- meaning one person can (and does) hold the majority of the voting shares. And that person is Mark Zuckerberg. 

Even though Zuckerberg holds only about 13% of the common stock, he owns more than 57% of the voting shares. Therefore, Zuckerberg can ultimately run Meta however he wants; there is no clear way for shareholders to oust him from his role as CEO.

Outside investors might want Zuckerberg to tap the brakes on his metaverse spending -- indeed, some have already gone public with their concerns. But, in the end, Zuckerberg doesn't have to listen.

So, if you're thinking of buying Meta after its latest dip, here's one thing to consider: Owning shares of Meta really means placing a bet on Mark Zuckerberg and his leadership. It's clear he thinks the best days of the company's core businesses (i.e., Facebook and Instagram) are behind it, and he has his sights set on a new vision, which is a long way from generating profits. 

With so many other tech stocks trading at historically cheap valuations and the overall economy looking shaky at best, Meta Platforms is not a stock I want to own right now.