Social media company Snap (NYSE:SNAP) crashed more than 26% on Friday after the release of the company's latest earnings results. It wasn't a terribly bad quarter for the company as Snap's adjusted earnings per share of $0.17 for the third quarter beat analyst expectations of $0.08. But the bigger concern was on revenue, where Snap reported $1.07 billion in sales versus Wall Street estimates of $1.1 billion.
And this may not be a one-time problem as Apple (NASDAQ:AAPL) has introduced new privacy measures on its iPhones so it's not as easy to track users. Snap CEO Evan Spiegel said that the changes were "making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS." That creates a problem for Snap as it could limit its growth opportunities – the company's average revenue per user of $3.49 this past quarter was well below analyst projections of $3.67.
The tech company isn't profitable and its stock is extremely expensive, and so the business can't afford any hiccups. Even with the drop in price, shares of Snap are trading at around 22 times revenue – Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) only trade at 12 and nine times their sales, respectively.
Investors a paying a significant premium for Snap and if the company can't find a way to get around the iOS privacy issues, this could be the start of a much bigger sell-off for an already overpriced stock. For now, investors are better off looking for safer growth stocks to hold as Snap just got a whole lot riskier.
