Stay away from this tech stock after earnings: Traders

Microsoft tops estimates
Microsoft tops estimates   

Shares of Microsoft soared on Friday after the company reported better-than-expected quarterly earnings and revenue, boosted by hardware sales and cloud revenue. But despite the move, some traders are sounding the alarm on the tech giant.

"Fast Money" traders Tim Seymour, Guy Adami and Brian Kelly all said to stay away from the stock even after it climbed higher in Thursday's after-hours session.

A press conference unveiled the Microsoft Windows 8 operating system in New York, Oct. 25, 2012.
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A press conference unveiled the Microsoft Windows 8 operating system in New York, Oct. 25, 2012.

"I would be very careful here," said Kelly on Thursday's "Fast Money." "I can't find too many faults with the quarter, but I'm just talking trading wise—don't get too aggressive."

Adami echoed that view saying that it was best to start taking profits on the rise that the stock picked up from earnings.

Seymour cautioned investors not to get too excited over the results, noting that the beat was largely due to the fact that the company had previously lowered earnings forecasts.

"If PCs and servers continue to suffer like they have, I don't understand how this stock does anything," said Seymour. He pointed to the company's developer conference next week as the coming event to watch for with the stock.

Currently, Microsoft's success is tightly tied to the PC market, where growth has been steadily declining with the rise of mobile and tablet computing. But the company is in the midst of a self-described turnaround plan spearheaded by CEO Satya Nadella, who has created a lot of excitement on the Street. Investors and analysts have started to buy into his vision of a cloud-centric platform.

But while the traders took a short-term view of Microsoft, other longer-term investors sense opportunity. Nomura Securities upgraded the stock Friday to "buy" from "neutral." FBR Capital analyst Dan Ives, a Microsoft bull, said the earnings report was a step in the right direction for Nadella.

Commenting to "Fast Money" after the result on Thursday, Ives noted that it really comes down to one thing for the tech giant: Windows 10

"If Windows 10 is successful, then Microsoft" is a $50 stock, said Ives. "As of now, I think investors went from a glass half-empty view to a glass half-full view now that we've had this quarter."

Despite the strong move after earnings, the stock has struggled to reach its all-time high of just more than $50, even as the Nasdaq composite continues to hit records. Including Friday's 10 percent jump, Microsoft is only up about 2 percent year to date, while the tech-heavy index has climbed more than 7 percent.