Recent volatility in technology stocks has created compelling buying opportunities, according to Mark Mahaney, Evercore ISI head of internet research, who named Amazon (AMZN) as his top pick in the sector.
Mahaney pointed to the company’s accelerating revenue growth across retail, advertising, and cloud computing as key drivers behind his bullish stance.
Speaking in an interview with CNBC, Mahaney explained that following a three-and-a-half-year rally in tech stocks (VGT), (XLK), (IYW), valuations had become unappealing with little market dislocation. The recent pullback, however, has changed the calculus for investors looking at the sector.
Mahaney highlighted Amazon’s (AMZN) record cloud backlog growth in the most recent quarter and expects healthy margins, particularly in the back half of the year. “There’s greater market skepticism about this name than I think at any point I’ve seen in a couple of years,” he said. “That creates your opportunity.”
Beyond Amazon, Mahaney sees attractive valuations across mega-cap internet names, noting that Alphabet (GOOG), (GOOGL), Amazon (AMZN), and Meta (META) are all trading close to 20x earnings on 2027 estimates. While he views both Alphabet (GOOG), (GOOGL) and Meta (META) as high-quality opportunities, Mahaney expressed a slight preference for Meta (META), given Alphabet’s recent strong performance.
The analyst acknowledged both certainties and uncertainties facing the sector, pointing to unprecedented capital expenditure spending of $700B as a “known known.”
The key questions for investors, he said, are when capex intensity will decline and when free cash flow will begin to inflect upward.
“When you get an answer to that, that’s when the stocks will move,” Mahaney noted.
Outside of the mega-caps, Mahaney identified several high-quality consumer internet stocks that have become dislocated, including Spotify (SPOT), Netflix (NFLX), DoorDash (DASH), and Booking.com (BKNG).
These names are trading near three-year trough multiples across various metrics including price-to-earnings, EV/EBITDA, and free cash flow.
“That list is longer now than it was three months ago,” he said.