Apple Inc. (AAPL) efforts to diversify its App Store revenue beyond games is resonating with Bank of America Merrill Lynch, which raised its price target on the stock because of those initiatives reported CNBC.

In a research report Bank of America Merrill Lynch analyst Wamsi Mohan upped his price target on the Cupertino, California iPhone maker to $250 from $230 and maintained his buy rating on the stock. With shares of Apple finishing Monday’s trading session at $215.46, the analyst thinks it can gain an additional 16%.

Diversifying Cuts Dependence Risk

"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," wrote Mohan. He said non-gaming apps are growing at a faster rate and represent a higher percentage of the revenue Apple gets from its App Store. Acknowledging that mobile games is still the largest contributor to revenue, the analyst said growth is now being driven by categories including entertainment apps and photo and video apps. Mohan raised his services revenue estimate for Apple for 2019 by around $800 million and is now factoring in “slightly higher margins.”   (See also: 10 Major Companies Tied to the Apple Supply Chain.)
 

Apple Is Killing It With The App Store

While much of the focus when it comes to Apple has been on its iPhones, more recently Wall Street and investors have been paying attention to non-smartphone sales at the company including App Store revenue. And for good reason. According to market research firm Sensor Tower, in the first six months of the year consumers spent $22.6 billion worldwide on Apple’s App store, about 90% more than was spent on Alphabet’s (GOOGL) Google Play store.  (See more: Apple's App Store Hit Record $300 Million in Sales on New Year's Day.)

The call out of Bank of America Merrill Lynch comes amid reports that Apple removed thousands of apps in China that allegedly ran afoul of regulations in the country. According to state broadcaster China Central Television, Apple removed 25,000 Apps from the store, accounting for about 1.4% of all the apps in the App Store in China. Among those removed were 4,000 that had the name lottery and gambling in them and were reportedly involved in selling fake lottery tickets or providing the ability to gamble. Although Apple has been abiding by the rules in China it remains under fire in the country for not doing more to prevent illegal activity on its platform.

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