Zillow is the riskiest Internet stock: RBC's Mahaney

Opportunities in the Internet sector

Zillow is the riskiest large-cap Internet stock in the near term, Mark Mahaney, lead Internet analyst at RBC Capital Markets, said on Friday.

Mahaney highlighted the online real estate database's acquisition of rival Trulia, which he noted saw strong deceleration in its metrics and revenue, some disruption in terms of real estate listings and mixed traffic trends.

"We'd be very cautious on Zillow. It's an interesting asset perhaps long term. We're not buyers of the stock either near term or long term, but near term we think there's more risk with this name than with any others in the large-cap space," he told CNBC's "Squawk on the Street."

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The outlook for S&P 500 earnings growth has turned dramatically lower since the beginning of the year. As of April 8, earnings growth for the S&P information technology sector is expected to contract 1 percent, compared with projections in January for 4.6 percent growth.

RBC on Thursday revised lower its revenue and earnings-per-share estimates for mid- and large-cap Internet stocks with international exposure, citing the strong dollar as the biggest macro headwind. It noted that 11 of 19 of the companies generate more than 25 percent of their revenues abroad, primarily in Europe.

A strong dollar dilutes the value of overseas earnings when U.S.-headquartered companies repatriate profits.

Priceline, Expedia, TripAdvisor and Facebook saw the biggest cuts due to material forex exposure. RBC said Street estimates for TripAdvisor are aggressive considering its currency challenges, and Priceline's first- and second-quarter revenues are at risk for the same reason.

"Maybe in the back half of the year we'll have a real nice setup for revenue growth acceleration but not yet," Mahaney said.

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Valuations are also looking less attractive heading into the earnings season following a recovery in some of the Internet stocks that had been beaten down at the beginning of the year, Mahaney said.

In the long term, Google and Priceline—with stock prices trading at 17 times earnings—are still attractive assets, he said.