Steer Clear Of Microsoft Stock Ahead Of Earnings? Why This Investor Says 'The Environment Is Impossible'

Zinger Key Points
  • "You've got multiple compression at the same time that earnings growth has never been more at risk," Josh Brown says.
  • Brown believes the risk/reward in Microsoft stock is skewed to the downside heading into earnings.
Steer Clear Of Microsoft Stock Ahead Of Earnings? Why This Investor Says 'The Environment Is Impossible'

Satori Fund founder and portfolio manager Dan Niles sees an ugly week ahead for big tech and has positioned accordingly by shorting Microsoft Corporation MSFT.

He's not the only one who thinks the risk/reward in Microsoft stock is skewed to the downside ahead of the print.

What To Know: Microsoft shares have held up well relative to the overall market, but the company's stretched valuation amid current market conditions has turned Ritholtz Wealth Management's Josh Brown cautious ahead of earnings. 

"You've got multiple compression at the same time that earnings growth has never been more at risk," Brown said Tuesday on CNBC's "Fast Money Halftime Report."

Microsoft is currently trading with a price-to-earnings multiple around 27, according to data from Benzinga Pro. The company has one of the highest valuations of the mega-cap tech stocks, but Brown is cautious on the entire group given ongoing market conditions.

"It has nothing to do with the quality of these companies or the execution or the strategy. Throw that out the window. The environment is impossible," Brown said. 

See Also: Meta, Google, Pinterest Hit With Price Target Cuts Ahead Of Q2 Earnings: Here's Why

Why It Matters: Long-term investors have time to wait it out, Brown said. 

"However, in the short term, if you're not long the stock, give me a reason to get long the stock," Brown said. "I can't think of any companies that have had a good report where you say 'oh, man I wish I was in it.' At best, it's like a 3% or 4% one-day rally."

On the other hand, companies that miss earnings this quarter are susceptible to massive selloffs because of the uncertainty in the market, he said.

"It's not a lot of fun to be specifically getting long stocks into the earnings given that asymmetrically. It'll end ... but let's not be in denial about what's happening here," Brown said.

Microsoft is expected to earn $2.30 per share on quarterly revenue of $52.47 billion when it reports financial results after the bell.

MSFT Price Action: Microsoft has a 52-week high of $349.67 and a 52-week low of $241.51.

The stock was down 2.87% at $251.40 at the time of publication Tuesday.

Photo: Courtesy of Microsoft.

Posted In: CNBCDan NilesJosh BrownEarningsNewsShort IdeasPreviewsTechTrading Ideas