Google Inc (NASDAQ:GOOG) doesn’t manage to make the same clean profit off of applications that Apple Inc. (NASDAQ:AAPL) does. The company offers part of the revenue from application sales to mobile carriers, and the lower average income of Android customers means that less money tends to pass through the Google Play store.

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Citigroup Inc (NYSE:C) analyst Mark May does not see these impediments lasting much longer, however. In a new report on Google Inc (NASDAQ:GOOG), which is entitled “Google’s Next Billion Dollar Business,” May takes a look at the potential of the Google Play store as a revenue earner for the company. His takeaways are pretty positive, and represent another upside for Google. The earnings impact might be small, but the diversification limits the company’s downside.

Google takes hold of app earnings with Google Play

According to May, Google Inc (NASDAQ:GOOG) is likely to see $1.3 billion in GAAP revenue in the calendar year 2103 from Google Play. He reckons that investors are downplaying the potential of the Google Play store as a money maker for Google, and that leaves some of the company’s potential unaccounted for. Google’s growth figures in app store revenue are going to be impressive, according to May.

Citigroup Inc (NYSE:C) is modelling CARG of 43% over the next five years. That suggests revenue of $5.2 billion from Google Play in the calendar year 2017. That would see the store make up around 6% of the company’s expected revenue in that year. Not a massive number, but a significant one as Google Inc (NASDAQ:GOOG) seeks to diversify its business.

Another $1 billion in revenue could be added if Google moves into app marketing with Google Play. May is expecting a great deal from the Google Inc (NASDAQ:GOOG) play store, but there are problems with the thesis. Google hides revenue from Google Play in its Other segment when it does its accounts. That means the forecasts in this report are based on third party information.

Google valuation soars with app store

After taking the potential of the application store into account, Citigroup Inc. (NYSE:C) meaningfully increased its Google Inc (NASDAQ:GOOG) price target. The bank now has a twelve month target of $1,190 on the company, up from $1,025. Shares in the firm are trading at more than $1,040 today.

Google Inc (NASDAQ:GOOG) shares have gained a phenomenal amount of value in 2013, and investors appear to still be happy with the company’s performance. Today marked a new high of more than $1,044 for the company’s shares.