One Wall Street Analyst Believes Alphabet Stock Has 12% Upside

The resurgence of the online advertising market has excited investors and pushed Google parent companyAlphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)The company's stock price has hit record highs over the past year. Over the past 12 months, the company's stock price has risen 42%.Stifel Financialanalysts see more upside for the company.

The investment bank maintained its Buy rating on Alphabet stock, but raised its price target to $174 from $154. That's a 11% upside over the next 12 months from where the stock was before.

Why Buy Alphabet Stock

In December, the tech giant unveiled its new Gemini artificial intelligence (AI) large-scale language model, which will lay the groundwork for new AI services for Google Search, YouTube and other products in the coming years. Wall Street is mostly bullish on Alphabet's prospects because it has a lot of cash resources, it has been investing in AI technology for years, and AI-enabled search has the potential to attract more users, which could increase advertising revenue.

However, the new technology may pose new challenges for Alphabet. Last year, theMicrosoftAlphabet's Bing beat Google to the punch by launching its own search function using artificial intelligence-generating technology. While Alphabet's revenue and profits have been growing at double-digit percentages, the company's shares trade at a P/E ratio of just 23.

But it's not easy to beat the search industry leader. According to Statista, Google Search attracts more than 90% of online search traffic. In the fourth quarter alone, Google Search translated this overwhelming advantage into $48 billion in revenue, or 55% of Alphabet's total revenue.

According to Wall Street consensus estimates, the company's long-term annualized earnings growth rate is 16%. Stifel appears to be adjusting its price target based on these estimates. Assuming the economy and advertising market continue to improve this year, Alphabet should report strong growth, providing the catalyst needed for the stock to reach the analysts' price target next year.

Should you invest $1,000 in Alphabet now?

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Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors. john Ballard has no position in any of the stocks mentioned above. the Motley Fool recommends Alphabet and Microsoft. the Motley Fool recommends the following options: a January 2026 $395 call option long on Microsoft and a January 2026 $405 call option short on Microsoft. the Motley Fool has a disclosure policy. The Motley Fool recommends the following options: Microsoft January 2026 $395 Calls Long and Microsoft January 2026 $405 Calls Short. The Motley Fool has a disclosure policy.

A Wall Street Analyst Sees 12% Upside in Alphabet Stock was originally published by The Motley Fool.