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Snap Stock Is Set to Go After a Splendid Earnings Report

Snap (NYSE:SNAP) stock looks good after it reported strong fourth-quarter results.
Source: Ink Drop / Shutterstock.com
It has already successfully integrated a high percentage of its users into AR/VR technology and is in the midst of launchin…

Snap (NYSE:SNAP) stock looks good after it reported strong fourth-quarter results.

Source: Ink Drop / Shutterstock.com

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It has already successfully integrated a high percentage of its users into AR/VR technology and is in the midst of launching several, very promising initiatives.

Consequently, I’m bullish on the longer-term outlook of SNAP stock.

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In general, Snap appears to be rapidly ascending in the social media sector, even as Meta Platforms (NASDAQ:FB), formerly known as Facebook, is rapidly descending.

Very Strong Q4 Results

On Feb. 3, Snap reported earnings per share of 22 cents, above analysts’ average estimate of 19 cents. Its top line came in at $1.3 billion, versus the mean estimate of $1.2 billion.

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SNAP’s daily active users jumped 20% year-over-year to 319 million. The user base in all three of its main regions– North America, Europe and Rest of World —  increased versus Q3.

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Meanwhile, in Q4, Snap’s top line jumped 42% year-over-year, while its revenue soared 64% year-over-year in all of 2021. Snap reported positive free cash flow for all of 2021.

On the Q1 guidance front, Snap predicted that its top line would be $1.03 billion to $1.08 billion, versus the mean outlook of $1.02 billion.

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Despite the challenges to Snap posed by the easing of the pandemic and the changes to Apple’s privacy rules, the social media company is clearly growing rapidly.

It’s generally performing quite well, particularly important in the current environment, Snap has become profitable.

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Snap’s Initiatives Continue to Progress

In my view, a key part of the reason for Snap’s strong success over the last few years has been the great effectiveness of its initiatives.

In past columns, I’ve pointed out that the company has launched a number of effective projects. I pointed out that it had direct response ads that proved to be very popular with marketers.

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It also allowed marketers to target ads to the website’s users who are most likely to make purchases, based on their history. On top of that Snapchat’s shows were then already being watched by more than 10 million people per month.

Fast forward to the present, and Snap is continuing to make great strides with multiple innovations.

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Meta Platforms is just starting to fully develop AR/VR infrastructure and had sold only  10 million of its “Oculus VR  headsets” as of early February, according to Nikkei Asia.

Conversely, Snap CEO Evan Spiegel reported on Feb. 3 that moe than 200 million people engage with augmented reality on Snapchat every day. He added that users “play” with AR Lenses an average of six billion times per day.

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Snap’s users have made more than 2.5 million lenses that have been viewed by Snapchatters now more than 3.5 trillion times. Spiegel reported that more than 300 creators have each reached more than one billion views of their lenses.

The CEO added that Snap is enhancing the tools used by lens makers, while other companies are looking to integrate Snap’s AR capabilities into their own apps and websites.

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So when it comes to AR/VR, I think it’s fair to say that Snap is walking the walk instead of talking the talk like Meta/Facebook.

Meanwhile, Snap has also incorporated additional games into Snapchat and added tools to its maps that are enabling its “users to view their safe snaps by location and explore new snaps submitted around the world,” Spiegel explained.

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Finally, the CEO reported that the company is successfully growing its business in India.

The Bottom Line on SNAP Stock

Despite the challenges that Snap is facing, the company’s financial data shows that it’s continuing to improve on both the top and bottom lines.

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What’s more, a relatively high percentage of its users is incorporating AR and VR, and it has multiple other, very promising initiatives.

Given Snap’s resiliency in the face of tough challenges, its continued strong financial momentum, and its clear ability to successfully launch effective initiatives, I recommend that investors buy SNAP stock.

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On the date of publication, Larry Ramer did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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