In 2022, economic uncertainty sent the S&P 500 and the Nasdaq Composite tumbling into a bear market, and all five FAANG stocks delivered their worst performances in more than a decade. The silver lining to that situation is that a new bull market will eventually wipe away the losses sustained by both indexes, and several FAANG stocks are well positioned to rebound when that happens.

Here's one FAANG stock to avoid and one to buy now.

The FAANG stock to avoid

Meta Platforms (META -0.55%) is the clear leader in social media. Facebook, Instagram, and WhatsApp are three of the four most popular social apps on the planet, and their ability to engage users made Meta the second-largest digital advertiser. But its recent financial results exposed cracks in the business that should give investors pause.

In the fourth quarter, Meta reached nearly 3 billion daily active users across its family of apps, and CEO Mark Zuckerberg said that more people are using Facebook, Instagram, and WhatsApp on a daily basis than ever before. Yet, Meta saw ad revenue drop 4% in the fourth quarter, and earnings plunged 52% year over year. To be fair, macroeconomic headwinds certainly played a part in those dismal results, but investors should still zero in on two problems.

First, Meta failed to grow ad revenue despite reaching a record number of daily active users, which implies that apps like Facebook and Instagram may be losing their allure as rivals like ByteDance's TikTok gain popularity. Additionally, if Meta already reaches 3 billion people each day, investors have to wonder whether its social apps are nearing saturation. In either case, Meta will likely struggle to grow its ad business at a meaningful pace in the coming years.

Second, Meta saw its profits cut in half last year, due in part to growing losses from Reality Labs, the segment of its business focused on building metaverse technologies. Investors have to wonder how quickly Meta can scale that segment, especially since Reality Labs' revenue fell 5% to $2.2 billion last year, while its operating loss reached a record $13.7 billion.

Here's the big picture: Meta is facing headwinds in its ad business, and Reality Labs is burning cash at a record pace. That portends more difficult days ahead, so investors should avoid the stock for the time being. That does not mean shareholders should sell. If Meta is successful in its metaverse ambitions, it will almost certainly be worth much more in the future. But I would wait for a little more clarity on whether the company can reaccelerate growth before starting (or adding to) a position in the stock.

The FAANG stock to buy

Netflix (NFLX -1.73%) got hammered by economic headwinds in 2022. The company reported its first subscriber loss in more than a decade during the first quarter, as high inflation led to changes in consumer spending. Meanwhile, unfavorable foreign exchange rates brought on by the strong U.S. dollar blunted growth throughout the year. For instance, while Netflix reported fourth-quarter revenue growth of just 2%, its top line increased 10% in constant currency.

Fortunately, economic headwinds are a temporary problem, and the fourth-quarter report included a few positive updates for investors. First, Netflix topped Wall Street's consensus with 4% subscriber growth, due in part to the successful launch of its ad-supported streaming service. Second, Netflix just launched a paid sharing product designed to prevent password sharing. For context, management believes 100 million households access content without paying and monetizing even a fraction of those households could substantially boost its subscriber base, which currently sits at 230 million.

More broadly, Netflix leads the streaming industry in terms of engagement, due in large part to its content leadership. Last year, Netflix accounted for 13 of the top 15 streaming series and five of the top 15 streaming movies, according to Nielsen. Also noteworthy, Netflix was the second-most-downloaded entertainment app (behind TikTok) in 2022. That information points to a strong competitive position in the still-nascent streaming industry.

According to Omdia, consumer spending on subscription video services will increase by 7% annually to reach $118 billion by 2027, while online video ad spend will increase by 14% annually to reach $362 billion during the same period. Given its brand authority and the recent launch of its ad-supported tier, Netflix is well-positioned to capitalize on both trends.

Currently, shares trade at 5.2 times sales, a discount compared to the five-year average of 8.4 times sales. That's why this FAANG stock is a buy.