The threat of changing laws and regulations has weighed on some tech stocks. However, the hardest hit stocks have been hurt the most from changes coming from other businesses, not government regulators.
For instance, earlier this year, Apple (AAPL) changed advertising-tracking policies on its devices. That’s led to poor performance in a number of companies, particularly those that offer social media services.
The biggest loser? Snapchat (SNAP). Shares peaked at $83 earlier this year, and have since lost 45 percent of their value, and are down nearly 15 percent in the past year. Several analysts are now cutting their expectations for the stock, but that’s too little, too late.
Because Snap has been hit so hard already, it’s gone from trading at over 500 times earnings at the start of the year to 112 times earnings. And while its advertising growth may slow, the company has still found a way to grow revenue at 57 percent in the past year.
Action to take: Snapchat shares look like a contrarian growth play here, especially with such minimal expectations from the market. Investors may like shares for a rebound in the coming months, although the stock doesn’t pay a dividend.
For traders, a longer-dated trade like the July $55 calls, last going for about $4.30, look like they could outperform in the coming months if shares end their downtrend and start to move higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.