• Snap’s  (SNAP) financial results and other metrics indicate that its initiatives are resonating with its users
• The company’s financial results are impressive
• The valuation of SNAP stock is attractive

Snap Inc’s (NYSE:SNAP) Snapchat, a social media website, appears to be pushing the right buttons to keep its users highly engaged and monetize them effectively. Meanwhile, after SNAP stock sank significantly in the last several months, the shares’ valuation is quite attractive.

As a result of these points, I’m very bullish on the shares’ long-term outlook.

Snap’s Multifaceted Approach to Attracting and Keeping  Users

Snap has launched several features on Snapchat that are very popular with young consumers.

First, its approach to integrating augmented reality, or AR, appears to be  resonating with its users. Specifically, instead of trying to create an all-encompassing metaverse on Snapchat, Snap has focused on enhancing the attractiveness of its AR Lenses and adding captivating, new features to them.

BBC explains that AR Lenses “overlay art on a user taking a selfie, or distort the live image in many different ways.” Snap has also enabled its users to integrate audio and music with Lenses, and it has incentivized third-party developers to create new features for Lenses.

During Snap’s fourth-quarter earnings call, held on Feb. 3, the company’s CEO, Evan Spiegel, said, “Over 200 million people engage with augmented reality on Snapchat every day, and our community now plays with AR Lenses an average of more than six billion times per day.”

Those are quite impressive engagement numbers which show that Snap’s approach to AR is very appealing to its core audience of young consumers.

Additionally, Snap has created an app called Dress X that enables “users to try on and wear digital fashion in real time, supporting unique experiences that combine the physical and digital realms,” Siegel explained. ” Dress X has seen incredible success and engagement as 75% of their total app users engage with AR Lenses and users try on AR looks 22 times per day on average.”

Other Successful Initiatives

I have been very upbeat on Snapchat’s original shows, which Snap collectively calls Discovery, for a long time. In February 2019, I wrote that I saw evidence that SNAP’s shows are quite sticky and added that they appeared to be boosting Snapchat’s  user metrics and bottom line.

Roughly three years after my February 2019 column on SNAP stock was published,  there’s reason to believe that the platform has grown much more popular over the years. In 2019, Snap touted the fact that a cumulative  “25 million-35 million people” had seen NBC News’ shows on Snapchat. In 2022, Spiegel commented that, “In Q4 2021, 25 different Discover partners each reached over 50 million unique Snapchatters globally.”

Finally, Snap’s most recent innovation is a feature called Spotlight, which displays “the most entertaining” pictures from Snap’s users.

Also worth noting is that Snap, I believe, continues to benefit significantly from its core users, in general, getting older, obtaining much more disposable income, and consequently becoming much more attractive to advertisers. That’s a trend which I’ve identified for years, but I think that it’s still improving Snap’s financial results year in and year out.

Snap’s Approach Appears to Be Working

Indeed, Snap’s financial results continue to be impressive. The company’s revenue jumped 64% in all of 2021 and 42% in Q4 versus the same period a year earlier.

And, as another InvestorPlace columnist, Mark Hake, pointed out in his March 31 column, the company’s free cash flow was positive in Q4, coming in at nearly $161 million, up from -$69 million during the same period a year prior and positive FCF of almost $52 million in Q3. Finally, as Hake pointed out, Snap’s Q4 EBITDA, excluding certain items, ” almost doubled to $326.7 million in Q4 2021.” And for all of 2021, Snap’s free cash flow was positive $223 million.

On the user front, Snapchat’s Q4 daily active users, or DAUs, climbed 20% YOY to 319 million. Snap noted that its DAUs had increased (versus Q3) and year-over-year in each of North America, Europe, and Rest of World.

Finally, analysts, on average, expect Snap to generate 2023 earnings per share of $1.01. Consequently, SNAP stock is trading at a forward price-earnings ratio of about 35. That’s a very low valuation for a rapidly growing company with a very promising future.

Snap’s impressive growth, its profitability, and the affordability of its shares makes the name a buy for long-term, growth investors.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.