Snap's stock drops as iPhone privacy controls pinch ad sales

SANTA MONICA, Calif. (AP) — Snapchat's corporate parent disclosed Thursday that its ad sales are being hurt by a privacy crackdown that rolled out on Apple's iPhones earlier this year, raising investor fears that the app's financial growth is going into a tailspin.

The revelation in Snap Inc.'s third-quarter earnings report sparked a sell-off in after-hours trading that could foreshadow one of the biggest one-day drops in the company's stock since it went public in 2017.

Snap's shares plunged by nearly 22% in Thursday's extended trading. If that decrease is mirrored in Friday's regular trading session, it will approach the stock's previous one-day nadir in May 2018 when its price also plummeted by nearly 22%. A decline of that magnitude would wipe out nearly $30 billion in shareholder wealth.

The alarms set off by Snap's disappointing performance could foreshadow troubles for other apps that may be having more problems tracking their users online activities because of an Apple update to the iPhone's iOS software released in April.

The change blocks online tracking on iPhones unless a user grants explicit permission to do so, making it more difficult for companies that sell ads based on the information they collect about people's interests and location.

In a statement, Snap CEO Evan Spiegel said the Santa Monica, California, company has had to recalibrate its operations to “navigate significant headwinds, including changes to the iOS platform that impact the way advertising is targeted."

Facebook, an outspoken critic of Apple's new privacy controls, had already told investors that its ad sales could suffer because of the change, but Snap's results indicated the blow may be even bigger than Wall Street anticipated. Facebook's shares shed more than 4% in Thursday's extending trading. The social networking company is scheduled to release its latest quarterly results Monday.

Snap reported revenue of $1.07 billion for the July-September period, a 57% increase from the same time last year, but that was about $30 million below the projections of Wall Street analysts who steer investor expectations.

Perhaps even more troubling to investors, Snap predicted its revenue for the current quarter will range from $1.17 billion to $1.21 billion. Analysts had been forecasting revenue of $1.36 billion, according to FactSet.