Apple

(AAPL) - Get Report

has gotten high enough for Smith Barney to advise clients that near-term profit-taking could become justified.

The stock closed Wednesday at $67.79, up 109% since the start of August. It eased $1.26, or 1.9%, to $66.52 in Thursday's premarket trading.

"While we do not see negative catalysts between now and year-end, our valuation work suggests that clients should use strength between now and January to take profits," Smith Barney said in lowering its investment rating to hold from buy.

The advice came in an upbeat note. Citing higher PC unit and iPod shipments, the brokerage raised its fiscal 2005 earnings estimate to $1.75 a share and raised its 2006 estimate to $2.11 a share. The current Wall Street consensus is $1.36 a share for 2005 and $1.69 a share for 2006, according to Thomson First Call.

And while Smith Barney suggested profit-taking now, it raised its 12-month price target on the shares to $75, reflecting a 29 multiple applied to the 2006 earnings estimate, plus about $15.50 of net cash on Apple's balance sheet.

"Despite the fact that we are raising our target multiple on calendar 2006 operating earnings this morning from 26 times to 29 times, we cannot justify more than a $75 fair value in 12 months. And while this suggests another 10%upside from current levels, we can no longer recommend that medium- to long-terminvestors place new money into the shares," the brokerage wrote.

Apple got a boost on Monday when Merrill Lynch raised its price target to $78 from $61 and predicted December-quarter iPod sales of 4 million, up from 3.5 million. On the same day, Bank of America put unit sales of the digital music players at 4.1 million in the December period and set a $73 price target, up from $47.