Microsoft’s post-earnings rally will be short-lived: Strategist

Microsoft surged on Wednesday after beating earnings estimates, but one strategist says that the hype will be short-lived.

The tech giant's stock rallied 5.3 percent to reach a three-month high during Wednesday trading. But Boris Schlossberg, managing director of FX strategy at BK Asset Management, says that a "short-term Microsoft story" is in the works that will see the company unable to maintain its momentum.

"You are never going to be buying Microsoft products unless you absolutely have to," he said Wednesday on CNBC's "Power Lunch." "Ultimately, I think that's a negative thing for the stock, even though of course they did well with the cloud. So I'm not really a big believer into this big move today."

In fact, Microsoft's total second-quarter revenue only reached $20.6 billion compared with $22.2 billion from the same quarter last year. While the company's cloud services saw a 7 percent increase in revenue, phone sales declined as the Windows Phone failed to gain traction. Even Microsoft's gaming division is in a slump as Xbox One sales disappointed, though the company is releasing the Xbox One S in August to compete against Sony's top-selling PlayStation 4.

However, not everyone believes that Microsoft could see a downtrend soon. Dennis Davitt, chief investment officer at Harvest Volatility Management, believes that Microsoft has become a strong stock.

"The other story about this is this is a stock that's now a yield stock," he pointed out. "So we see it similar to Coca-Cola, Philip Morris, Procter & Gamble. Those stocks all have a 3 percent dividend yield. Microsoft now pays a 2.5 percent dividend and it trades roughly at a 26 P/E."

"It's been around, it has good cash flow, so you see people investing in those stocks, and I think there is growth there," he added.

Microsoft closed on Wednesday at $55.91, just slightly under its intraday high of $56.76.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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