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While Apple Inc. (NASDAQ: AAPL) stock has more or less kept pace with the broad markets so far this year, the six-month and one-year charts are disappointing, to say the least. Historically, it may have been hard for some analysts to bet against at the iPhone giant, but over the past couple of months more analysts are finding themselves on the sidelines. However, Merrill Lynch has now come out in favor of Apple, and the analyst sees a very bullish future for the company for a number of reasons.

Merrill Lynch sees the risk/reward and valuation as favorable, and it is now bullish over inventory reductions and order cuts stabilizing, better China services, a revision overshoot on estimates, increased services penetration, competitor pricing, a loyal user base and strong cash flows.

As a result, Merrill Lynch raised the rating on Apple to Buy from Neutral and raised its price objective to $210 from $180. That implies upside of 21.5% from the most recent closing price of $172.91.

Ultimately, Merrill Lynch believes that this recent pullback in Apple’s stock offers a solid entry point. The share price is down 26% from its peak (S&P down 9%) and up 9% year to date (inline with S&P 500). Merrill Lynch’s scenario analysis suggests that shares are discounting a “declining hardware” scenario (ex-cash, services), and the debate hinges on the L/T trajectory. In the firm’s opinion, weakness in hardware is not entirely structural.

Merrill Lynch detailed in the report:

We upgrade Apple to Buy (post our downgrade on Nov 2, 2018), predicated on: (1) stability of supply chain order cuts and large reversal of inventory overhang in iPhones, (2) gross profit dollars reversing from declines to growth in 2H19, which is correlated to the stock price, (3) modest reacceleration in services (China gaming) including upcoming announcements, (4) overshoot of negative estimate revisions particularly in F20/21, (5) growth across healthcare, wearables and increasing services penetration, (6) growing installed base of users that will refresh supporting 200mn iPhone average annual shipments with cyclicality around it, (7) competitive products supporting a higher price umbrella around foldable and 5G phones, (8) highly loyal user base (Fig 20/21 show results of our global survey of 151,262 total respondents across U.S., U.K, China, and India), with low churn where demographic changes are in Apple’s favor, (9) strong FCF with potential for M&A, and capital return (support for the stock given the recent selloff and lowered relative weighting), and (10) valuation ex-cash attractive at 10x. We raise our PO to $210 from $180.

Shares of Apple closed Friday at $172.91, in a 52-week range of $142.00 to $233.47. The consensus analyst price target is $177.99. Following the report, Apple shares were up almost 2% at $176.07 in early trading indications Monday.