Under a worst case scenario where tens of millions of Americans are forced to stay home to help contain the spread of COVID-19, a few Internet stocks are poised to outperform their peers, according to RBC Capital Markets analyst Mark Mahaney.
Internet stocks that are expected to outperform their peers if tens of millions of people are "cocooning" at home include Netflix Inc (NASDAQ: NFLX) and social media companies, Mahaney said on CNBC. Many people would find it difficult, if not impossible to find any form of live entertainment which from an investor point of view supports churn metrics.
Facebook, Inc. (NASDAQ: FB) would be counted on by people as a form of communication with others as well as entertainment, he said. Twitter Inc (NYSE: TWTR) is more of a play on communication and access to information.
Ride-hailing companies like Uber Technologies Inc (NYSE: UBER) and Lyft Inc (NASDAQ: LYFT) derive around 15% of total rides to or from airports, Mahaney said. These companies are clearly "a negative derivative" to any large-scale shutdown of travel. Uber offers a small hedge in its food delivery business against airport travel exposure.
Twitter Activist Campaign
Separately, Twitter CEO Jack Dorsey is under attack by activist Elliott Management, which is looking to oust the founder. Mahaney said Singer is likely looking at Twitter's management approach which falls short of "dysfunctional" but is certainly "unusual." Mahaney he believes Twitter made a mistake of not investing enough in R&D and the platform, which resulted in glitches.
"It's an interesting pitch, it's not irrational," he said.