With Meta Platforms (META -1.41%) shares falling about 65% over the past 12 months, many investors likely have their eye on the stock. Has the sell-off gone too far, making shares of the social media company a buy? Getting straight to the point, a close look at the stock reveals that shares do, indeed, look cheap today. But this doesn't mean investors should rush in to buy shares. Indeed, it may make sense to sit on the sidelines when it comes to Meta stock.

Here's why.

Several red flags

As a tech company with revenue tied very closely to the digital advertising market, it makes sense that the Facebook parent company's top line would face some headwinds during times of macroeconomic uncertainty. But the issue with Meta's stalled top-line growth is that it isn't solely due to the macro environment. One of the major factors weighing on Meta over the past year has been a change in the way Apple's iOS measures and tracks advertisements on its platform. This ultimately disrupted Meta's advertising effectiveness on the platform, exposing a chink in the company's armor.

Meta founder and CEO Mark Zuckerberg refers to the issue as "signal loss." While the company has been working on addressing this challenge by increasing its first-party understanding of its users' interests to make it easier for people to engage with businesses within its apps, headwinds remain. For what it's worth, however, Zuckerberg said in the company's third-quarter earnings call that he's "confident" the company can build the infrastructure needed to "come out of this downturn with even more superior ad products and a meaningful technology advantage over other industry players."

Another red flag for investors is the company's dogged spending on product development and services for the metaverse despite the nascent segment bleeding massive amounts of cash. The company's reality labs segment, which includes augmented and virtual reality-related consumer hardware, software, and content, reported a loss from operations of $9.4 billion for the trailing-nine-month period ended Sept. 30. Despite this atrocious performance, Meta seems intent on keeping the reality labs segment a priority. Management said in Meta's third-quarter update that it expected the segment's operating losses to "grow significantly" next year.

These red flags, combined with a difficult macroeconomic environment, are weighing heavily on Meta. Third-quarter revenue fell 4% year over year and third-quarter net income plummeted 52% over the same time period.

One reason for optimism

While Meta's current situation isn't pretty, investors can at least take some comfort in the fact that Wall Street has already priced in a gloomy outlook. The stock trades at just 11 times earnings as of this writing.

Despite the stock's seemingly cheap valuation, investors shouldn't feel like they need to rush in and buy shares. Declining earnings amid two major red flags -- challenges from iOS and enormous losses from its reality labs segment -- are big enough concerns to avoid the stock entirely. While the company may seamlessly work through these challenges, making the current stock price look like a bargain in hindsight, there's also a chance that these issues are a sign of more trouble ahead.

Fortunately, investors don't need to form an opinion on every stock. When it comes to Meta, I'm going to sit out and put the stock in my "not sure" pile while I watch from afar.