Investors have worried about a broad-based economic slowdown, causing Internet stocks to fall more than the general market. However, RBC Capital Markets argues that the selloff is now providing buying opportunities. 

The Dow Jones Internet Composite index (First Trust Dow Jones Internet Index Fund, FDN), which tracks the performance of the Dow Jones Internet Composite Index, has fallen 40% this year, more than the S&P 500’s 19% drop. 

We examine the carnage that was the Q1 internet earning season, and we look for names where there is more downside risk versus those where there is less downside risk,” analyst Brad Erickson said on Thursday.

The analyst said that certain internet stocks might be more resistant to economic downturns if the economy deteriorates in the second half of the year. However, he added that valuations have become overly pessimistic relative to fundamentals for certain companies.

Despite the economic environment worsening in the second half of the year, Booking Holdings (NASDAQ:BKNG), Meta Platforms (FB), and Uber Technologies (UBER) were reaffirmed at $2,800, $240, and $46, respectively, due to the analyst’s Outperform rating. There have been signs that the travel business will be strong shortly. 

Booking reported stronger-than-expected first-quarter earnings last week. Its management said it was preparing for a ‘busy summer travel season.’ In addition to gaining market share in the U.S. due to increasing cross-border international business, Erickson expects the firm to benefit from increased cross-border international trade.

Target (TGT) management revealed to investors on Wednesday that they believe consumers are shifting spending away from physical merchandise towards “going out” experiences, which may benefit the travel industry. 

According to the analyst, ad agencies recently suggested that Meta’s spending on Facebook’s social media platform is strong despite his prior assumptions. “Several respondents pointed to FB as being better safeguarded than other ad players in the event of a wider slowdown,” he wrote. Ad agencies “identified FB spend as a potential late cut to ad spend in the event of a broader slowdown.” 

Finally, Erickson thinks Uber shares are attractive after a 44 percent drop in 2017. The company has “driver supply advantages, higher incentives now less risky,” and “strong travel tailwinds to come,” making it more appealing. In addition, the ride-hailing company, which reduced staff and marketing expenditures to boost profitability, emailed its workers in early October to cut back on hiring and marketing expenses.

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