Apple Inc. (NASDAQ: AAPL) is considered by many to have one of the best products and ecosystems, surrounding its iPhone. The company is continuing to improve its products and the outlook is incredibly positive. A key analyst call from Merrill Lynch predicts that this trend will continue for the iPhone, but there are some near-term headwinds for iPads.

Merrill Lynch’s Wamsi Mohan reiterated a Buy rating for Apple with a price objective of $145. The rating is based on strong near-term momentum of the iPhone supply chain.

As a result, the firm is consequently raising its near-term iPhone estimates from 46 million for the calendar year second quarter to 50 million, and that results in an increase to the fiscal 2015 iPhone unit estimate to 229 million from 225 million.

Based on Merrill Lynch’s installed base analysis, the firm is also raising its fiscal 2016 iPhone estimates to 223 million from 200 million. Positive revisions are expected to continue.

However, iPads seem weaker and Merrill Lynch is lowering its near-term estimates to 9.9 million from 11.2 million units for the calendar second quarter and then to 10.1 million from 10.8 million units for the third quarter. The firm expects the rate of decline to ease on introduction of the larger screen in the calendar fourth quarter, which could be attractive for enterprises.

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Merrill Lynch detailed in its report:

While the iPhone 6 & 6 Plus have obviously been a success, investors now grapple with whether the new phones are causing demand to be pulled in from outer quarters, leading to a possible shortfall of demand in 2016. Our analysis suggests that using conservative assumptions for 1) upgrades from prior versions of iPhone and 2) new users entering the Apple ecosystem, iPhones will likely be roughly flat on a year over year basis (conservatively) versus our prior assumption of a ~10% decline. Incremental new user additions (particularly in China) can drive incremental upside.

In terms of the financials, Merrill Lynch is increasing its estimates for the coming years. For the 2015 fiscal year, the firm expects $9.05 in earnings per share (EPS) on 232.4 billion in revenue. For the 2016 fiscal year, EPS is expected to be $9.65 and revenue is expected to be $243.1 billion.

The brokerage firm gave its investment thesis as:

We rate Apple Buy on: 1) strong iPhone product cycle 2) development of new revenue sources like Apple Pay, Apple watch, home/health kit etc, and 3) optionality provided by a significant cash balance that can help accelerate innovation into new markets.

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Shares of Apple were up 0.7% to $128.20 Thursday morning, within the 52-week trading range of $89.65 to $134.54. The stock has a consensus analyst price target of $148.75.

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