With PCs declining and tablets and smartphones ascendant, there's growing concern among Wall Street analysts about Microsoft's stock after its recent move higher.
"Microsoft and some of the other tech names have had a big move over the last couple of days because of some data coming out of the Asian manufacturers that March was a pretty good month for building machines," Rick Sherlund, head of U.S. technology research at Nomura, told CNBC on Thursday.
Investors were expecting PCs to be down about 7 percent in the quarter, but data from research firms Gartner and IDC have them down 11 percent to 14 percent, he said.
"The fundamentals are slipping for the core business," Sherlund said.
That decline had him moving to the sidelines on the stock Thursday, downgrading Microsoft to "neutral" from "buy" with a $32 price target as the market grapples with how much of a secular decline Microsoft is experiencing and how much benefit it may see from an upgrade cycle.
"PCs are a mature market in the enterprise space and in gradual decline, while in the consumer space half the market does not need Office, so they don't need Windows and don't need Microsoft," Sherlund wrote in a note. "These consumers want an easy-to-use experience to consume content with their tablet or smartphone, with disposable apps and a rapid pace of innovation.
"If the need is just for a tablet, Microsoft is not the first or second choice in the market, and Windows 8 does not change that dynamic," he added.
Other analysts were even more bearish, with Goldman Sachs slapping a rare "sell" rating on the stock, given worsening PC trends and a lack of traction in tablets and smartphones.
But Sherlund sees opportunity later in the year, when a new Intel processor will give light, thin notebooks a 10-hour battery life and reduce the price to about $600 from $900 to $1,000 today, he said. That could spur the half of consumers who still use notebooks to finally consider upgrading their aging machines, he said.
And depending an increase in PC demand, the stock could do better. Microsoft shares remain attractively priced at nine times 2013 earnings, excluding cash, with a free cash flow yield of 11 percent.
"There's an opportunity for the stock to do better when you get to the second half of the year," he said.
—By CNBC's Justin Menza
Nomura intends to seek or receive compensation for investment banking services from Microsoft in the next three months.