Mark Mahaney on Finding Entry Points in Consumer Tech Stocks

The Challenge of Finding Entry Points

• 💡 The speaker, Mark Mahaney, notes a major rerating in consumer internet stocks over the past three years.
• 🎯 He is currently struggling to find great entry points in these names, unlike earlier in the year for stocks like Uber and Google.
• 📌 While companies like Meta are considered good compounders with reasonable valuations, they are not considered "dislocated" enough for his hunting strategy.

Defining "Dislocated Stocks"

• 🚀 Mahaney hunts for "DHQs" – dislocated high-quality names.
• 📉 These are stocks that have traded off significantly (20-30%) or trade at a discount to their growth rate.
• 📊 An example of a dislocated stock would be a high-quality company generating earnings in line with or faster than the market, but trading at a discount to the overall market.

Amazon Web Services Outage Impact

• ⚠️ The recent AWS outage is noted, but its long-term impact is uncertain.
• ⚡ While AWS has experienced outages before, this one occurs at a time when AWS is perceived to be losing market share to competitors like Google Cloud and Azure.
• 📈 For AWS to win incremental clients, it needs to recover fully and quickly from such outages.

Valuation and Productivity Trends

• 💰 The concept of "valuation per employee" is discussed, with a focus shifting to revenue per employee and operating income per employee.
• 📈 The speaker highlights a significant increase in revenue and operating income per employee for the four major hyperscalers (Microsoft, Amazon, Google, Meta) starting in 2023.
• 🧠 This productivity gain is attributed, in part, to the deployment of AI within these companies, making employees materially more productive.
• ✅ Mahaney believes that major tech names are not trading at the extreme multiples seen during the dot-com bubble, and names like Google and Meta are reasonably valued as enduring consumer utilities.