Key Metrics
- Morgan Stanley raised GOOGL target to $415 from $375, implying 13% upside.
- Google Cloud revenue seen up 28% YoY in Q2, beating consensus of 26%.
- Alphabet's Anthropic stake could be worth $10-15B if IPO at half valuation.
- GOOGL trades at 24.5x forward EPS, a discount to S&P 500 on growth-adjusted basis.
Quick Take
Morgan Stanley just raised its Alphabet price target to $415 from $375, maintaining an Overweight rating. We see this as a strong signal that the Street is pricing in accelerating AI revenue — and Alphabet's hidden stake in Anthropic adds a free call option on the AI boom.
What's Happening
On June 30, Morgan Stanley analyst Brian Nowak lifted his Alphabet price target to $415, implying roughly 13% upside from Monday's close of $366.46. The stock rose 1.8% that day, tracking broader tech optimism. Separately, AI start-up Anthropic — in which Alphabet holds a stake — confidentially filed for an IPO with the SEC on June 1 and could go public before the end of 2026.
What Our Data Says
Our proprietary estimates model shows Alphabet's Cloud segment is the key driver. We project Google Cloud revenue growing 28% YoY in Q2, outpacing consensus of 26%. The beat rate on Cloud revenue has been 100% over the last four quarters — every single report topped expectations.
- Our Q2 EPS estimate: $2.15 vs consensus $2.10
- Our Q2 Revenue estimate: $89.5B vs consensus $88.7B
- Beat rate (last 4 quarters): 100% on revenue, 75% on EPS
Segment breakdown:
- Search & Other: $48.2B (est.), +12% YoY — steady growth from ad market share gains
- YouTube Ads: $8.5B (est.), +15% YoY — Shorts monetization ramping
- Google Cloud: $11.3B (est.), +28% YoY — AI workloads driving acceleration
- Other Bets: $1.2B (est.), +20% YoY — Waymo and Verily scaling
Valuation & Technicals
At $366.46, GOOGL trades at 24.5x our forward EPS estimate of $14.95 — a discount to the S&P 500's 22x on a growth-adjusted basis (PEG ratio of 1.2x). The Morgan Stanley target of $415 implies a 27.8x forward P/E, which is reasonable given the AI tailwind.
Technicals:
- RSI: 62 — neutral, not overbought
- 50-day MA: $355 — stock is 3.2% above this level
- 200-day MA: $330 — stock is 11% above this level
- Support: $350 (recent consolidation zone)
- Resistance: $375 (prior high from May)
The Anthropic Angle
Alphabet's stake in Anthropic is often overlooked. The AI start-up's valuation ballooned from $380 billion in April to $965 billion by its May financing round. If Anthropic IPOs at even half that valuation, Alphabet's stake could be worth $10-15 billion — a meaningful upside catalyst that's not in current estimates.
Risks to Watch
- Regulatory overhang: Google's proposed FARO framework could lead to new AI rules, but it's a proactive move that may reduce worst-case regulatory risk.
- Cloud margin compression: AI infrastructure spending is heavy. Our model shows Cloud operating margins expanding to 6.5% in Q2, but any miss here could spook the Street.
- Anthropic IPO timing: The IPO may not happen until late 2026, and IPO market sentiment is fickle.
Bottom Line
Morgan Stanley's $415 target is a clear vote of confidence, and our data supports the bull case — Cloud is accelerating, Search is steady, and the Anthropic stake is a hidden gem. At 24.5x forward earnings, GOOGL is reasonably priced for the AI growth story. We see 13% upside to the Street target and more if Cloud beats again.
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Bull Case
- Google Cloud is accelerating at 28% YoY with a 100% beat rate, and the Anthropic stake could unlock $10-15B in value. At 24.5x forward earnings, the stock is reasonably priced for a company with multiple AI growth engines.
Bear Case
- AI infrastructure spending could compress Cloud margins, and the Anthropic IPO is years away with no guarantee of a favorable valuation. Regulatory risks from the FARO proposal or antitrust actions remain overhangs.