Top tech analyst Mahaney says sell-off has gone too far — 7 dramatically cheap stocks he likes

Published Tue, Nov 15 202212:38 PM EST

Internet stocks have been slammed this year, and Evercore ISI sees opportunity amid the carnage. The SPDR S & P Internet ETF has lost more than 50% year to date amid rising inflation and higher interest rates. The major correction in internet sector multiples occurred in 2021 and the first half of 2022, but those multiples have stabilized over the last several months, said Evercore ISI analyst Mark Mahaney. "There is always multiple risk, but our take is that most of the multiple risk has been removed from the 'Net sector," he wrote in a note Monday. As a result, there are several names that are trading well below their median historical multiples that look attractive right now, he said. Here are seven of those stocks. Meta and Spotify Technology are both trading 65% below their pre-Covid average multiples, according to Evercore ISI. Meta shares were down 73% year to date at one point earlier this month. However, they recovered some of those losses after CEO Mark Zuckerburg announced the company was laying off more than 11,000 employees and taking steps to become leaner and more efficient. The Facebook parent remains a leading global social media and messaging platform and it still has a high-margin and free-cash-flow generating business model, Mahaney said. Meanwhile, Spotify's third-quarter results provided more evidence that 2022 is a monthly-active-users acceleration year, which increases the odds that next year paid subscriptions will accelerate, Mahaney said. Despite disappointing gross margin results, he sees an expansion next year. The stock is down more than 60% this year. Another name on his list is Uber , trading 50% below its pre-Covid average multiple. The ride-sharing company's stock has lost about 25% year to date. "We see rationalization of industry incentives, growing driver supply, improving operational metrics, expanding Uber One membership (10MM+), and limited Macro impacts to the Mobility segment (it's a utility) and possibly to the Delivery segment as creating a powerful combination of premium and sustainable top-line growth AND rapidly scaling profitability," Mahaney said. His top mega-cap internet stock is Netflix , which is trading 31% below its pre-Covid average multiple. The streaming servers ad-supported and password-sharing revenue opportunities can drive material reacceleration in revenue growth, he wrote. Its core subscription business can also return to growth, Mahaney said. The stock has lost about 50% this year. —CNBC's Michael Bloom contributed reporting.

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