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Apple Services Revenue: Not All Fun And Games

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Apple Services Revenue: Not All Fun And Games

A decline in the share of Apple Inc. (NASDAQ: AAPL) Services revenue contributed by gaming is good news, as it's evidence of diversification, according to Bank of America Merrill Lynch.

The Analysts

Analyst Wamsi Mohan reiterated a Buy rating on Apple and increased the price target from $230 to $250.

The Thesis

The relative contribution that games make to App Store revenue is declining, Mohan said in a Tuesday note. (See the analyst's track record here.) 

Games have accounted for 72 percent of App Store revenue year-to-date compared to 78 percent in 2017 and 82 percent in 2016, the analyst said. 

“The strong growth rate of non-gaming categories gives us increased confidence in the sustainability of strong App Store sales, and reduces risk of dependence on one single category of Apps," Mohan said. 

Entertainment apps account for 7 percent of store revenue versus 3 percent in 2016, the analyst said. Social networking apps amount to 5 percent of revenue compared to 4 percent in 2016. Photo and video apps account for 2.5 percent, up from 1 percent in 2016.

BofA raised its estimate for Apple's 2019 Services revenue by $800 million. 

Price Action

Apple shares were trading nearly flat at the time of publication Tuesday at $215.44. 

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Photo courtesy of Apple. 

Latest Ratings for AAPL

DateFirmActionFromTo
Sep 2019ReiteratesBuy
Sep 2019MaintainsNeutral
Sep 2019MaintainsStrong Buy

View More Analyst Ratings for AAPL
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Posted-In: App Store Bank of America Merrill Lynch services Wamsi MohanAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

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