Jefferies raised its price target on Google Inc's stock to $695 from $600, while reiterating its buy rating, citing optimism among advertisers for fiscal 2010 amid improving macro environment.

Our channel checks point to strengthening advertising, e-commerce environment and improving fiscal 2010 outlook, which bodes well for Google, analyst Youssef Squali wrote in a note.

Online sales are up 3 percent from November 1 to December 6 of this year, supporting the prospect for a modestly positive growth in e-commerce this holiday season compared to a 3 percent drop last year, Squali said.

Google, with its ability to cost effectively drive traffic to e-tailers, stands to benefit disproportionately.

Over 65 percent of online ad budgets continue to go to 'search', with Google claiming the lion's share, the analyst said.

Commentary out of Yahoo , AOL and Value Click last week points to strengthening demand from advertisers, he added.

Shares of the company were up nearly a percent at $595.42 in early morning trade on Nasdaq.

(Reporting by Mansi Dutta in Bangalore; Editing by Anil D'Silva)