Mark Mahaney, Evercore ISI’s Head of Internet Research, recently offered a sharp analysis of key internet stocks on CNBC’s Power Lunch, delving into Google’s position in the generative AI landscape, Expedia’s investment appeal, and Snapchat’s persistent struggles. Mahaney emphasized that while Google’s latest Pixel product launch might not dramatically shift his immediate view on Alphabet, the underlying narrative for the tech giant remains compelling. He asserted that Google is poised to be "one of the best beneficiaries, largest derivatives of the growth in Gen AI."
The Evercore analyst pointed to Google’s consistent double-digit search results growth, even amidst the rising prominence of conversational AI platforms like ChatGPT, as clear evidence of this trend. Beyond its core search business, Mahaney highlighted Google's broader AI integration, citing Waymo, its autonomous driving division, as a prime example of AI's physical manifestation. This underscores Google's deep, multi-faceted commitment to artificial intelligence beyond just software. Despite a significant 25% rally in Alphabet's stock over recent months, Mahaney still finds its valuation attractive at 18-19 times earnings, predicting a continued re-rating, potentially boosted by an upcoming judicial decision concerning Google's future.
Shifting focus to Evercore ISI's top picks, Mahaney revealed Expedia has replaced Uber, largely because Uber’s stock has already delivered substantial returns since the beginning of the year. He described online travel as an "improving asset in a highly attractive vertical" for investors seeking growth at a reasonable price (GARP) or even pure value. Expedia’s valuation is "intrinsically compelling: 14X P/E for an asset with a sustainable mid-teens EPS outlook." He noted the company generates solid high double-digit or low double-digit revenue growth, strong margins, ample free cash flow, and engages in dividends and share buybacks. Furthermore, Mahaney views Expedia's new management team, including its CEO and CFO, as a beneficial "trade-up" for the company.
Conversely, Mahaney painted a grim picture for Snapchat, attributing its woes to a fundamental lack of user base expansion. While Snap retains a substantial core user base, it has stagnated around 100 million in the U.S. More critically, the platform has shown "just not on the advertiser side" the innovation needed to drive revenue. He contrasted Snap's low single-digit ad revenue growth with Google's near 15% and Meta's 20% increases, questioning the rationale for investing in Snap when larger, more dynamic platforms offer superior growth at better valuations. Mahaney also expressed skepticism about Snapchat’s significant investment in new generative AI hardware devices, such as Snap Spectacles, drawing parallels to Meta's ambitious yet unproven metaverse bets. He believes the market shares this skepticism, as a paradigm shift from phones to AI-powered headsets remains a distant prospect. Until Snap demonstrates tangible progress on the advertiser front and user growth, Evercore ISI maintains an "in-line" rating, indicating a lack of recommendation for the stock.
