Cowen on Thursday downgraded shares of social media company Snap as lingering challenges with Apple's privacy rules impact advertising revenue. The firm lowered its rating on Snap to market perform from outperform. Analysts also slashed the price target on the stock to $45 from $75. The new price target implies 5.3% upside from Wednesday's closing price. Shares fell 2.6% in premarket trading Thursday. "The 3Q21 print showed that SNAP DR (direct response advertising) was not immune to negative impacts of iOS 14.5 /[Identifier For Advertisers] changes and we are concerned SNAP may have to continue to navigate through them in the coming quarters," Cowen's John Blackledge said in a note. Apple in April launched an update to the iPhone operating system, iOS 14.5, that asks users when they open an app if they want to opt into being tracked. Snap shares plunged after the company reported third-quarter earnings in October that missed consensus revenue expectations. Management cited the Apple changes for the underperformance as advertisers look to spend their dollars elsewhere due to the waning efficacy. Cowen sees these challenges with iOS privacy continuing based on a survey of 54 U.S. ad buyers in December. "As it relates to iOS 14.5 changes, the respondents said there are noticeable declines in ROI (return on investment), challenges regarding attribution and measurement and less ability to re-target consumers, among other things," Cowen's John Blackledge said. Plus, Snap faces tougher comparisons in the first half of 2022 after elevated revenue growth the year prior, according to Cowen. The firm also thinks Snap shares are expensive relative to peers. Snap shares struggled in 2021, down 6.1% on the year versus the S & P 500's nearly 27% gain. The stock is down 9.1% in 2022. —CNBC's Michael Bloom contributed reporting.
People walk past Snap Inc. Snapchat signage displayed in downtown Los Angeles, California on October 2, 2021.
Patrick T. Fallon | AFP | Getty Images
Cowen on Thursday downgraded shares of social media company Snap as lingering challenges with Apple's privacy rules impact advertising revenue.