Google Inc (NASDAQ:GOOG) shares just keep going higher and higher, and analysts at Raymond James think the sky’s the limit. In fact, they’ve raised their price target to $1,260 per share, citing strength in the search giant’s fundamentals.

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Google channel checks look good

Analyst Aaron Kessler previously had a $1,030 per share price target on Google. He continues to rate the company as Outperform and said he maintains his positive outlook on Google because of their recent channel checks. They found continued growth in search spending during the December quarter, as well as growth in Product Listing Ads, mobile and strong trends in engagement, particularly in growth of YouTube usage.

The analyst believes that there’s potential for revenue and earnings per share upside in Google Inc (NASDAQ:GOOG)’s report this month. He’s expecting to see long-term mid-teens growth in earnings per share.

Expectations for Google’s December quarter

Google will report the results from the December quarter on Jan. 30. Kessler estimates that the company will report $12.01 billion in net revenues, which would be a 22.2% increase year over year. It’s slightly below the consensus of $12.08 billion. He thinks Google will report $13.23 billion in total net revenues, compared to consensus estimates of $13.5 billion.

For non-GAAP earnings per share, they’re estimating $12.27, which is slightly ahead of consensus at $12.24 per share. He believes Google’s core search business will show a 26% year over year growth in clicks and a 9.1% decline year over year in cost per click.

Seeing positive data points for Google

The analyst said their checks on Google Inc (NASDAQ:GOOG) suggest that search spending was positive in the fourth quarter. They checked with search engine marketing firms, and as a result, they’re expecting to see search spend growth accelerate modestly from the third quarter.

They also believe Google had strong growth in Product Listing Ads during the quarter. One firm estimates that those ads rose 85% year over year. Two other firms estimate that spending on those ads rose 70% or 80% year over year.

Engagement trends also remain positive for Google, with total minutes rising 13% year over year, compared to 16% in October. YouTube total minutes rose 40% year over year, compared to 37% in October.

Focusing on Google

The Raymond James analyst said he will continue to focus on trends in volume and cost per click, as well as combined net revenue growth. He said they will also be looking at growth in mobile and display ads and also whether Google Inc (NASDAQ:GOOG) is keeping a handle on traffic acquisition.

Other key issues he will be keeping an eye on are the macro-economic environment in general, Moto X handset sales and hardware plans, and Google’s acquisition of Nest.