Veteran internet analyst Colin Sebastian explained why investors might not want to abandon large-cap tech stocks just yet.
In an exclusive interview for CNBC PRO with Mike Santoli, Sebastian said that in the e-commerce space, Amazon still has plenty of opportunity in its core retail business to generate even more revenue in the years to come.
"There's still significant runway within Amazon's core businesses. Again, they've only 5 percent market share in retail," he said. "What we've seen fairly consistently over the years is that new Prime members will tend to spend more each year after they become a member. And that drives a significant portion of Amazon's growth in addition to adding Prime members in other geographies."
"We do think they have some pricing power, though," he added. "As they expand or broaden the amount of services that are provided under a subscription, we do think they do continue to raise prices a little bit."
Sebastian is a senior research analyst at Robert W. Baird, where he has covered internet and interactive entertainment since 2011. Before that, he spent six years at Lazard Capital Markets developing the company's internet and video game research. He has also worked at J.P. Morgan/Hambrecht & Quist as an investment banker.
"If we look at the appreciation in those stocks over the past three years, about 90 percent of that appreciation has been from profit growth and revenue growth, not from the expansion of earnings multiples. That's very different from the dot-com days," the analyst said. "From the valuation perspective, these stocks are much more palatable and, in fact, if you look over the past three or four years, they're not at a bottom, but they're also not near the top either in terms of multiples."
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The interview is exclusively for CNBC PRO subscribers.