There is no doubt that the EU has Alphabet Inc (NASDAQ:GOOGL) in its “cross-hairs.” Coming on the heels of a $2.7 billion fine levied on Alphabet for using Google search to give illegal advantages to its own comparison shopping service, the company is once again under intense scrutiny. The EU is now looking to roll out even tougher sanctions on the tech giant, due to allegations surrounding its Android and AdSense business practices.

Underscoring the potential risks the latest EU investigation can pose to GOOGL, top analyst Mark Mahaney of RBC believes: “Investors may be underappreciating the regulatory risk facing GOOGL. But they aren’t underappreciating risks related to rising TAC (Traffic Acquisition Costs), which are largely driven by revenue share payments by Google to Mobile and Desktop OEMs and Carriers. Rising TAC at GOOGL has been one of the biggest investor concerns we have heard. The rub here is that the potential next EU regulatory action may well involve forcing Google to ‘unbundle’ Android from its other services – Search, YouTube, Maps, etc. This in turn could provide negotiating leverage to OEMs…and thus lead to potentially higher TAC expenses.”

The impact on TAC is of particular concern for investors, because “every 100 bps of increased TAC would clip $0.40 or 1% from our ’18 EPS estimate. The take-away from this is that the greater risk to GOOGL would likely come from Multiple vs. EPS pressure,” opines the analyst. However, Mahaney does underscore that the current investigation into GOOGL “is unknown and leverage could play out several ways.”

“Recent developments lead us to highlight GOOGL as facing the greatest regulatory risk among Large Cap ‘Nets. We are esp. focused on the TAC expense risk raised by potential EU action against Google’s Android system. Still, we are Outperform based on what we view as sustainable & scarce premium growth, significant option value & reasonable valuation,” notes the analyst.

As such, the analyst maintains an Outperform rating on GOOGL with a price target of $1,050, representing an 11% rise over current trading levels.

Mark Mahaney has an outstanding TipRanks score with a 73% success rate and a high ranking of #12 out of 4,633 analysts. Mahaney realizes 24.4% in his annual returns. However, when recommending GOOGL, the analyst posts gains of 16.6%

Tipranks analytics reveal GOOGL as a Strong Buy. Out of 33 analysts polled by TipRanks (in the past 3 months), 30 are bullish, while 3 are sidelined on Alphabet stock. With a near 17% upside potential the stock’s consensus price target stands at $1,098.94.