CREDIT SUISSE: Alphabet is our No. 1 internet stock pick

Google’s parent company Alphabet could be worth $US1,100 a share, nearly one-third more than it’s trading for, Credit Suisse analysts said in a note to clients on April 17.

Shares of Alphabet rose 1.2% to $US833.64 as of 2:21 p.m. in New York on Monday.

Credit Suisse named Alphabet one of its three favourite consumer Internet stocks. Facebook, and Amazon are the other two top large-cap consumer internet stocks to own, the bank says.

Stephen Ju covers Alphabet for Credit Suisse and explained that it’s the bank’s number one pick because he thinks the company will do better than investors currently expect in a few key areas. These are:

1) Monetizing Google Search advertising.

2) Non-search businesses, namely YouTube, Google Play and The Google Cloud.

3) New monetisation initiatives such as Maps as well as the eventual commercialization of Google’s Other Bets.

Even though Google Search can overshadow all other aspects of Alphabet’s business, Credit Suisse says that as Google search matures, other faster-growing Alphabet subsidiaries such as YouTube, Google Play, and Google Cloud will grow and make up one-third of Alphabet’s business within three years.

Alphabet is Credit Suisse’s favourite internet stock because it has been underperforming its peers since the beginning of 2016. Also, it trades at about 16 times Credit Suisse’s 2018 non-GAAP EPS estimate, way behind Facebook at 25 and Amazon at 55 times.

The bank noted some risks to its bullish view. They include the slower-than-expected adoption of Google’s new ad units, or a loss of market share of non-Android smartphones.

Click here for a real-time Alphabet chart.

Get the latest Google stock price here.

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