Jefferies Sees Alphabet’s (GOOGL) Data Moat and Cloud Growth Driving Long-Term Upside
Alphabet Inc. (NASDAQ:GOOGL) is among the best software infrastructure stocks to buy according to hedge funds. On January 5, Jefferies reaffirmed its Buy rating but raised its price target on the stock from $320 to $365.
As per the update, there were a number of factors that bolstered Jefferies’ positive case, and the first one among them was the “unrivaled data moat” that Alphabet Inc. (NASDAQ:GOOGL) has. Another factor was the company’s capability to sustain Gemini’s dominant position. The firm believes that this is well supported by Alphabet’s broad product ecosystem, which includes seven platforms with more than 2 billion monthly active users each.
Jefferies expects net revenue growth to moderate to around 13% in 2026, following two years of approximately 15% growth. However, operating leverage is expected to remain intact, with operating margins projected to expand by roughly 140 basis points to about 39%. This should partially offset the growth deceleration and support earnings. Moreover, the firm forecasts Google Cloud to sustain growth above 30% through 2026, driven by continued outperformance from Google Cloud Platform.
Despite Alphabet’s 2026 EV/EBITDA valuation of 17.6x, near its 15-year peak, Jefferies analysts believe the company’s strong earnings growth should justify a higher valuation. In a bull case scenario, they argued that its multiples could expand toward the valuation it commanded before the global financial crisis.
Alphabet Inc. (NASDAQ:GOOGL) is the parent company of Google and a pioneer in internet-related services and products, including online advertising technologies, search engines, cloud computing, software, and hardware.
While we acknowledge the potential of GOOGL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 7 Spin-Off Companies in 2025 and 11 Best Stocks You’ll Wish You Bought Sooner.
Disclosure: None. This article is originally published at Insider Monkey.
Content Original Link:
" target="_blank">
