Apple's shares closed at a 52-week high of $29.30 yesterday, beating the previous one-year high of $28.32 met on April 5. However, despite Apple's impressive second-quarter results, Prudential Equity Group has questioned whether the recent performance is sustainable, suggesting that good iPod sales will not result in long-term profitability.
The research firm said: "The sustainability of recent performance, given that most of the upside has been driven outside the core business.
"We would like to see more spillover from iPod sales into the core CPU business before we would become more positive on the shares, particularly during the seasonally weakest quarter of the year."
Prudential suggested: "Apple still needs to make structural changes on the cost side in order to compete more profitably against Dell and others over the longer term."
However, the firm admitted that it was impressed by Apple's product pipeline and its "ability to continually reinvent itself," raising the fiscal 2004 revenue forecast to $7.84 billion from $7.46 billion and earnings view to 60 cents per share from 45 cents, according to Forbes.
It also raised the 2005 revenue estimate to $8.51 billion from $8.20 billion and earnings estimate to 75 cents per share from 65 cents.
Prudential is maintaining a neutral rating on the shares.