These stocks are the best buys in the internet sector, says Evercore ISI's Mark Mahaney

Published Mon, Apr 5 20214:59 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

The internet sector may not be broadly attractive to investors in the near term, but some of the biggest stocks in the space are positioned to be long-term winners, according to Evercore ISI. Evercore strategist Mark Mahaney and a team of analysts initiated coverage of the internet sector on Monday. The group of stocks is full of companies that performed well in 2020 as investors piled into growth names, but have slowed this year as the reopening trade took center stage. In a note, Mahaney described his overall outlook on the sector as "Near-Term Pragmatic, But Long-Term Bullish" and listed top picks across several different market cap categories. "We expect consolidation in H1:21 for the most part, but pockets of material outperformance when investors focus on '22 outlooks, and the sector's growth scarcity returns," the note said. "And the 'Net sector's growth scarcity WILL return, as we see over $4T in incremental demand coming Online (Retail, Advertising, Travel) by 2025 due to ongoing digital disintermediation." Among mega-cap tech stocks, Evercore selected Facebook - which it called the "one of the highest quality stocks in 'Net land" — and Uber as two of its top picks. Mahaney's team is bullish on a rebound and pull-forward in demand from online advertising, which benefits Facebook and Pinterest , another top pick. One of Evercore's favorite stocks is Spotify , which has struggled in recent months and is down more than 13% for the year. However, that has created an attractive entry point, according to Mahaney. "We view the recent 20% stock price correction as a buying opportunity. SPOT's 85-country expansion, multi-market price increase, and significant product innovations should lead to acceleration in [monthly active users], Subs & Revenue Growth, along with Gross Margin inflection," the note said. Evercore did not initiate coverage of any of the stocks in the space with an underperform rating. Some notable names that are rated as in-line include Booking Holdings , Twitter and Shopify . -CNBC's Michael Bloom contributed to this story.

This illustration photo shows a person checking the Facebook app on a smartphone in Los Angeles, March 1, 2021.

Chris Delmas | AFP | Getty Images

The internet sector may not be broadly attractive to investors in the near term, but some of the biggest stocks in the space are positioned to be long-term winners, according to Evercore ISI.

Evercore strategist Mark Mahaney and a team of analysts initiated coverage of the internet sector on Monday.

The group of stocks is full of companies that performed well in 2020 as investors piled into growth names, but have slowed this year as the reopening trade took center stage.