'This is what you live for': Top tech analyst says buy the dip on these high-quality stocks

Published Thu, Apr 28 20229:03 PM EDTUpdated Fri, Apr 29 20228:19 AM EDT

The beaten-down tech sector may seem like a daunting hunting ground, but Evercore ISI's Mark Mahaney says investors should seize the chance to buy high-quality assets while they're on sale — and reveals his top picks. After years of market-beating returns, tech stocks have suffered a massive retreat this year amid expectations of aggressive tightening by the Federal Reserve and a looming recession. Disappointing first-quarter earnings from Netflix and Google-parent Alphabet have further compounded nervousness in the sector. But Mahaney, head of internet research at Evercore ISI , believes investors should seize the chance to buy the "best and the leading global defining franchises" while they're on sale. "You want to stick with the highest quality assets you can find in tech and that's Google and Amazon first and foremost. Facebook's [ Meta ] a little bit further down that space. These are the names that I think are very well positioned as high-quality consumer tech or tech franchises, not just for the year but for the next five to 10 years," he told CNBC on Wednesday. "You get high quality assets that are trading 20% off as part of a broad market sell down. This is what you live for." Top pick He names Amazon as a stock he "loves" for the long-term and says it's his top pick in the tech space. He also highlighted Amazon as the "best operator" in handling supply chain issues, given that it has more "scale, experience and expertise." "Amazon is one of my favorite stocks because I think we got a really nice acceleration story in the back half of the year, and the margin expansion story. One of the many good things that it has is a management team that aggressively invests and innovates," Mahaney said. Read more Credit Suisse loves these tech stocks, says 3 have upside of more than 130% Fundstrat's Tom Lee says FAANG stocks are value buys amid tech sell-off Bank of America names its top global tech stocks — including one it says has upside of 100% He noted Amazon's efforts to deepen its distribution and logistics core competencies during the "darkest days" of Covid-19 in 2020 and 2021, through doubling its infrastructure, as well as fulfillment and distribution capacity so it could offer faster shipping and distribution relative to its peers when demand recovers. "My guess is that we are going to see that show up in spades in Amazon's results, unless the global recession cuts that off. But sooner or later, we're going to see that in Amazon's results," he added. Mahaney was speaking ahead of both Meta and Amazon's first-quarter earnings , published Wednesday and Thursday respectively. Meta's potential Mahaney also likes Facebook parent Meta as a "wonderful example" of a dislocated high-quality company. He believes the company will be able to address most of its critics over the next 12 months. "I like the setup on Facebook. It is a value stock, [trading] at 12 to 14 times earnings for what I think is not value [but] premium growth. I think this stock is going to materially rerate," Mahaney said. Mahaney noted that Meta is still the global leader in social media and messaging, with the pandemic having driven increased usage of the company's platforms. "That's a pretty impressive accomplishment," he said. In addition, he believes Facebook's "engineering talent" will eventually prevail over Apple 's privacy change. The social media company had noted in its fourth-quarter earnings call on Feb. 2 that the privacy change, which limits advertisers from accessing an iPhone user identifier, will decrease the company's sales this year by about $10 billion. Mahaney is also optimistic that Meta will soon be able to monetize its short-form video platforms. Meta CEO Mark Zuckerberg highlighted Instagram Reels as one of the company's "major investment priorities" this year during the fourth-quarter call. The feature, which allows Instagram users to create and share short-form TikTok-like videos, is now Meta's "fastest growing content format by far," according to Zuckerberg.

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