Why Snap Stock Is Down By 23% Today

Snap Stock Dives As Apple’s Privacy Rules Put Pressure On Revenue

Shares of Snap found themselves under significant pressure after the company released its third-quarter results. The company reported revenue of $1.07 billion and adjusted earnings of $0.17 per share, beating analyst estimates on earnings and missing them on revenue.

The changes to Apple’s iOS platform put pressure on the advertising business. According to Snap, changes to ad tracking made more difficult to manage ad campaigns for iOS, while Apple-provided measurement solution did not work as well as Snap expected.

In addition, current supply chain issues and labor shortages reduced companies’ desire to advertise their products and services. Thus, Snap received a double hit from changes in Apple’s privacy policy and pandemic-related issues.

What’s Next For Snap Stock?

Currently, analysts expect that Snap will report earnings of $0.36 per share in 2021 and $0.8 per share in 2022, so the stock is trading at 72 forward P/E even after the major pullback.

Snap is richly valued like many tech stocks in the current market environment. At such valuation levels, Snap shares are very sensitive to any negative changes in the company’s growth outlook.

The hit from Apple’s privacy policy changes was bigger than the market and the company itself expected, and it remains to be seen whether Snap will be able to solve its Apple-related problems in the fourth-quarter of this year.

At the same time, the company will also have to deal with pandemic-related shortages which have put pressure on businesses’ desire to advertise their products. Judging by recent developments in various industries, these problems may persist well into 2022, so analysts may have to adjust their 2022 earnings forecasts for Snap.

The stock remains very expensive, and even speculative traders may wait for additional pullback before buying Snap shares. However, the general risk appetite remains strong, so Snap stock may get more support in case S&P 500 moves towards the 4600 level.

For a look at all of today’s economic events, check out our economic calendar.