RBC's Mahaney: Why Amazon is a good buy

Shares of Amazon.com have fallen sharply in 2016, but investors should still buy the stock, RBC Capital Markets' Mark Mahaney said Tuesday.

"They had an issue with expenses in the fourth quarter; we thought it was an excess demand problem. We thought too many people wanted to use Amazon's delivery network. That's a good problem to have, because they will figure that out," the firm's lead tech analyst told CNBC's "Squawk Box."

The e-commerce giant's stock has fallen over 15 percent this year, despite an 18 percent bounce from its February lows.

Amazon shares in last 6 monthsSource: FactSet

Mahaney said Amazon's excess demand problems should be alleviated soon, as the company increases its order fulfillment fees.

"About half of all of the items sold by Amazon are actually other people's products, and Amazon packs them and sends them … and charges them a fee for that," he said.

"It's actually a good move for Amazon to have all these third-party vendors saying 'take our inventory and deliver it for us because you do a better job of it.' That way Amazon has better control over the cost and better control over the customer experience."

Amazon's stock was down slightly in the premarket.

Disclosure: RBC makes a market in Amazon.