Facebook parent Meta Platforms (META -0.90%) reported third-quarter earnings on Oct. 26, and the stock tanked by more than 24% on the news. So far this year, shares are down 67%, much steeper than the S&P 500's decline of 17.5% in the same time frame.

Investors were disappointed by a major earnings miss in the third quarter and the social media company's guidance for revenue to decline for the fourth quarter amid weak advertising and surging expenses for fiscal 2023.

The Reality Labs segment has been spending billions of dollars on research and development for the metaverse, and currently does not have much to show for it. This huge spending is hurting Meta's profitability, causing a 46% year-over-year drop in operating income in the third quarter.

The picture is definitely not rosy for this social media stock, but the market seems to be underestimating the potential of the company's cash cows, Facebook and Instagram -- which are still going strong. The stock's valuation is also too cheap to ignore.

With all that in mind, you might ask yourself, is Meta worth owning now? Let's find out.

A robust core business and new advancements

At the end of the third quarter, around 3.71 billion people used at least one of the company's apps (Facebook, Instagram, or WhatsApp) at least once a month, up 4% on a year-over-year basis. Ad impressions grew year over year by 17% in the third quarter. With an already large user base, it's encouraging that the company is adding users even during the current slowdown.

Meta also reported an 18% decline in average price per ad, mainly driven by the company's rising focus on Reels -- short-form videos on its Facebook platform -- which are monetized at a lower rate than its Feed or Stories features. But it expects a further increase in demand for Reels in the next 12 to 18 months to neutralize this revenue headwind.

Thanks to advancements in the artificial intelligence (AI) engine powering its recommendations, Reels are being played 140 billion times a day across Facebook and Instagram, a 50% increase from six months ago. The company expects Reels to gradually grab market share from TikTok in the short video format.

Meta is also focusing on monetizing WhatsApp and Messenger through click-to-messaging ads, which allow businesses to directly contact customers via WhatsApp, Instagram Direct, or Messenger. Although relatively new, it has emerged as the company's fastest-growing advertising product with a $9 billion annual run rate. With 2 billion daily users, there is still significant growth potential for advertising on WhatsApp.

A strong balance sheet

Although Meta has been investing significant free cash flow in the Reality Labs segment, it still has a very strong balance sheet. The company had total cash of $41.8 billion and total debt of $26.5 billion at the end of the third quarter.

Analysts expect Meta's revenue to rise 6.4% and adjusted earnings per share to fall by 9.9% next year.

It is currently trading at a historical low of 9.2 times earnings, which seems inexplicable considering the company's solid social media positioning.

Is Meta stock a buy?

Apple's privacy changes have made targeted advertising difficult. Meta also faces increasing competition from TikTok. However, the company is working around these challenges by deploying AI and machine learning to bolster the use of its various platforms' features.

On Nov. 9, Meta announced layoffs of 11,000 people or 13% of its workforce. While mass-scale layoffs are seen as unsettling, they can prove to be a blessing in disguise for the company's shareholders in the long run. The move has highlighted the company's commitment to operating efficiency and profitability, even at the expense of bad press.

Meta's longer-term prospects depend heavily on the metaverse, a global market opportunity estimated to grow from $500 billion in 2020 to $800 billion in 2024. Since CEO Mark Zuckerberg owns 56% of voting shares in the company, investors do not see any significant slowdown in spending on the metaverse.

If Zuckerberg's vision is realized, it will be a huge tailwind. Meta has also partnered with several technology companies, including Microsoft, Adobe, and Accenture, on new capabilities for the metaverse.

So despite the many headwinds, investors might consider buying a small position in this stock based on the company's solid core business, robust balance sheet, cheap valuation, and vision for the future.