It's been a historically bad year for Meta Platforms (META -1.41%), the parent company of Facebook. The company's shares have dropped by 73% this year, losing a substantial amount of market value in the process. Meta Platforms has faced a series of issues, including a decrease in ad spending -- which is how the tech giant makes most of its revenue.

Meta Platforms may continue to struggle due to the challenging economic conditions. Companies are unlikely to increase ad spending amid high inflation and an economic recession that could be on the way.

But can Meta Platforms recover once the economy improves? Let's look at one reason it might, and one reason to worry about the company's future. 

Chart showing Meta Platforms' price lower than the S&P 500 in 2022.

META data by YCharts

Green flag: Meta Platforms' ecosystem

In the third quarter, Meta Platforms' revenue decreased by 4% year over year (YoY) to $27.7 billion. Sure, certain dynamics that have little to do with the company's business did affect its revenue growth. That includes currency exchange rate fluctuations. The strengthening of the U.S. dollar had a meaningful effect on Meta's top line. In constant currency terms, the company's revenue increased by 2% YoY.

Even so, the company's advertising business is definitely taking a hit. Meta Platforms' management talked about weak advertising demand. We can probably blame the broader economic environment for that, but here's the good news: Meta Platforms continues to increase its already massive user base. During the third quarter, the company had 3.71 billion monthly active users, a 4% YoY increase.

No other social media platform has an ecosystem that large. Furthermore, Meta Platforms will likely maintain the bulk of its users, especially across Facebook and Instagram. Both these services have built strong name brands and audiences, and they arguably benefit from the network effect -- their value increases as more people use them. 

Facebook helps people connect with family and friends, and the more people on the platform, the more it will attract potential users looking for a platform where they can interact with as many of their loved ones as possible.

Thousands of people now make their livelihood on Instagram, and the more it becomes popular and gains users, the easier it is for businesses, individuals, and influencers to advertise their products (or themselves) on the platform. 

That leaves Meta Platforms' advertising business in a great position to recover once the current economic circumstances change. 

Red flag: Rising expenses tied to the metaverse

Not only did Meta Platforms' revenue decrease during Q3, but the company's costs and expenses increased too: They jumped by 19% YoY to $22.1 billion. Declining revenue coupled with rising expenses isn't a great combo for any company.

Furthermore, Meta Platforms' cost increases are partly tied to its Reality Labs segment. This business unit is tied to Meta Platforms' virtual reality, augmented reality, and other metaverse-related endeavors.

In Q3, Meta Platforms' Reality Labs business reported an operating loss of $3.7 billion, worse than the loss from operations of $2.6 billion it recorded during the year-ago period. Let's not forget that Meta Platforms changed its name to emphasize the shift toward its metaverse ambitions.

But right now, it's a dead weight on the bottom line, which will remain the case for a while. The metaverse isn't up and running yet, not even close. Although Meta Platforms is generating revenue from augmented reality and virtual reality hardware, the money it's putting into it isn't yielding a positive return on investment yet. 

The risk here is that the metaverse will never be the massive opportunity Meta Platforms thinks it will be. If that happens, the company will have wasted substantial money and time. Investors considering initiating a position in Meta Platforms should keep that in mind. 

Is Meta Platforms a buy?

Meta Platforms' stock is cheaper than it has been in a while.

Chart showing Meta Platforms' PE and PS ratios falling since early 2022.

META PE Ratio (Forward) data by YCharts

And while the company's earnings growth might not pick up next year, it will eventually once the advertising landscape changes. Some analysts estimate that the online advertising market will expand at a compound annual growth rate of 14.3% through 2027. It likely won't stop there as the world continues to go digital. Given that few companies can rival Meta Platforms' ecosystem of users, it will continue to be a leading avenue for advertisers to target customers.

The company is also looking to monetize its platforms with e-commerce, which could be a massive opportunity across Instagram and other social media websites and apps it owns. What about Meta Platforms' metaverse ambitions? Thankfully, the company's massive free cash flow is helping cover its metaverse investments.

Meta Platforms generated $13.2 billion in free cash flow in the first nine months of the year, although that represented a massive decrease of about 49% YoY.

Some have estimated that the metaverse could turn out to be a $1 trillion opportunity. Meta Platforms could be one of the biggest beneficiaries of that, but even if the idea doesn't pan out -- or falls short of expectations -- the rest of the company's business will remain solid and continue growing.

That's why Meta Platforms remains a solid stock to buy, especially at current levels.