Despite a painful year for internet stocks, opportunities in the beaten-up sector are plentiful for investors positioning for a recovery, according to top tech analyst Mark Mahaney. It was a tough year for the sector as valuations tumbled from record highs in an environment defined by rising rates and fears of slowing economic growth. Against this backdrop, the tech-heavy Nasdaq Composite is down more than 31% from its height and about 30% this year, but a comeback may loom on the horizon. While Mahaney viewed the sector cautiously in 2022, the comedown in both estimates and multiples, coupled with cost-cutting initiatives like layoffs, positions many of these names for an “EPS slingshot opportunity” when a recovery occurs in 2023 or 2024, he said. “We would especially highlight stocks going into ’23 where we believe: a) revenue models are reasonably recession resilient; b) there are new product cycles; and c) cost actions have already been taken,” the Evercore ISI analyst wrote. Here are some of Mahaney’s favorite internet plays: Netflix shares have suffered one of the more gruesome routs this year, with the stock slumping about 47% as the company shared subscriber losses and battled growing streaming competition . The stock’s bounced back from its lows, offering a 76% return since July 1. Big banks like Bank of America and Wells Fargo recently upgraded the stock, viewing upside from Netflix’s ad-supported tier. Similarly, Mahaney views the company’s cheaper ad-supported tier as a slightly recession-protective offering that can also drive a reacceleration in revenue growth. Heading into the new year, Mahaney also likes Uber , with the firm’s price target suggesting shares can nearly triple from Friday’s close. Despite suffering a loss in its recent quarter, the ride-sharing giant posted strong forward guidance and a revenue beat as lockdowns ease and consumers return to travel. Shares are down about 37% this year. Mahaney also named Booking Holdings among his top internet picks, highlighting the company’s roughly $1.1 trillion total addressable market opportunity and “asset-light” business model. Booking shares have tumbled about 16% this year. Mahaney’s $2,600 price target suggests shares could gain 29% from Friday’s close. During a recent interview with CNBC’s “Closing Bell,” Mahaney called Booking one of his favorite travel plays heading into the new year , given its solid management team and cautious approach to its cost structure. “They could arguably grow faster — post-Covid, post-normalization — than they were back in 2019,” he said. “That’s a good story to put together.” Names like online-dating app Bumble and web software company Wix were also included in Mahaney’s top picks list. — CNBC’s Michael Bloom contributed reporting
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