Source: Google.

Based on price forecasts from Wall Street analysts, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) stock offers a big upside potential of more than 20% during 2015. These kinds of estimates should always be taken with a grain of salt; however, there are valid reasons to believe Google could deliver sizable gains for investors in 2015 and beyond.

By the numbers
According to data compiled by Thomson Reuters, the average price target for Google among Wall Street analysts is $623 per share, implying a potential gain of nearly 23% from current levels. The lowest forecast among analysts is $565, implying upside potential of 11%, while the most optimistic estimate is for a price target of $700, this represents a potential gain of 38% from a current stock price in the neighborhood of $508 for class C shares.

These numbers look quite attractive for investors in Google stock, and they sound reasonable from a valuation point of view. Google is trading at a forward P/E ratio of nearly 17 according to consensus estimates on S&P Capital IQ, roughly in line with the average valuation for companies in the S&P 500 index. Fortunately for Google shareholders, their company arguably deserves a higher valuation than the average S&P 500 component.

Google is a market leader in the much promising online advertising business, and it's outperforming most companies in the S&P 500 by a considerable margin. Sales during the third quarter of 2014 increased 20% year over year to $16.5 billion, quite an extraordinary growth rate for a company of its size. Google has robust profit margins in the area of 23% of revenues at the operating level, and the company offers a rock-solid balance sheet carrying more than $62 billion in cash and marketable securities.

Considering growth, profitability and financial strength, Google is broadly superior to most companies in the S&P 500 Index, and a premium company deserves a premium valuation.

The risks
Google operates in an intensely dynamic and always-changing industry landscape. The mobile computing revolution is offering significant opportunities for growth in online advertising, as consumers around the planet are spending a growing share of their time and attention online via multiple screens.

However, ad prices are declining, and this is generating some concerns among investors. Paid clicks increased by a healthy 17% during the last quarter, but the average cost per click, which measures how much money Google makes per click, declined 2% versus the same quarter in 2013. The company is still doing quite well when considering overall demand, but falling ad prices are an important risk to watch.

In addition, competitive pressure is on the rise. Facebook (NASDAQ:FB) is a particularly strong challenger making big inroads in online advertising. The social network announced an explosive increase in revenues of 59% during the September quarter, reaching $3.2 billion. Mobile advertising accounted for 66% of Facebook's advertising revenue during the period, up from 49% of advertising revenue coming from mobile in the third quarter of 2013, so Facebook is doing particularly well in this crucial growth area.

The opportunity
It's easier for smaller companies to achieve rapid revenue growth, so Facebook and other players will most likely gain some ground vs. industry giant Google over the coming years, but that doesn't necessarily mean the future is bleak for investors in Google stock.

Google's competitive strength is nothing short of remarkable. The company has a market share of 91.5% in mobile search according to NetMarketShare, and Android devices power 84.8% of smartphones around the world based on estimates from IDC. In addition, Google makes many of the most popular apps for IOS, so the company's position in mobile is as strong as it gets.

Google has built an enormously valuable ecosystem of services and applications, including massively popular names such as Gmail, YouTube, Chrome, and Google Maps, among several others irreplaceable properties.

The company becomes stronger as it gets bigger over time, gaining valuable information from users and using it to position its ads more effectively. Growth rates may fluctuate from quarter to quarter, but in the long term, Google is poised to continue delivering a solid financial performance.

Stock prices are practically impossible to predict with precision, so there is no reason to tell for sure if Google will reach its price target in 2015. One thing looks clear, though: When considering the company's strengths and current valuation, Google offers substantial room for gains from current levels.