Pacific Crest Sees Microsoft Upside To $68 Based On Sum-Of-Parts

In a report published Tuesday, Pacific Crest Securities analysts maintained an Overweight rating on Microsoft Corp (NASDAQ: MSFT), with a price target of $50.Microsoft is hosting an analyst day and is expected to provide more details on Windows 10 and the Microsoft model going forward. "Based on our sum-of-the-parts analysis, we see upside in MSFT to $68. Even our worst-case scenario provides support for $41. So, we see 10 percent downside to 50 percent upside. Therefore, we remain buyers of MSFT," the analysts mentioned.The company has started delivering on the changes announced by it last year. The company is also demonstrating a renewed financial discipline and is expected to report accelerating growth in its core businesses.The analysts believe that Microsoft Office 365 is worth $16/share. "Microsoft is having tremendous success with Office 365, and we estimate that it could be worth $25, or $16 in current value," the analysts stated. Microsoft's commercial licensing business is growing modestly on a constant-currency basis since much of its new commercial business is occurring in the cloud. The business is expected to continue at its current pace. "The company's commercial licensing is worth $21/share.," the analysts commented.Microsoft's Windows business is worth $6. "While we expect the Windows business to decline during 2015, it is likely to stabilize going forward. We believe Windows 10 could provide a bigger product cycle for Microsoft than most investors currently appreciate," the report mentioned.