The Dow Jones Industrial Average (DJINDICES:^DJI) was lower by lunchtime Thursday, down about 0.3% at 11:55 a.m. EDT. Congress is inching its way toward another stimulus package to support the economy amid the pandemic, but the recent surge in cases of COVID-19 is starting to show up in the numbers. Initial jobless claims for the week ended July 18 came in at 1.42 million, marking the first increase since March.

Shares of tech giants Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) were down Thursday. Microsoft beat revenue and earnings estimates when it reported results on Wednesday evening, but that wasn't enough to push the stock higher. Meanwhile, an analyst warned investors to avoid Apple stock ahead of its report next week.

Man holding his head looking at computer screens.

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Solid earnings not enough for Microsoft

The pandemic continues to help more than hurt Microsoft's business. Fiscal fourth-quarter revenue of $38 billion was up 13% year over year and $1.48 billion ahead of analyst estimates. The intelligent cloud segment, which houses the company's Azure cloud platform, grew revenue by 17%. The more personal computing segment, which includes Windows, Surface hardware, and gaming, enjoyed 14% revenue growth.

Earnings per share came in at $1.46, up 7% year over year on an adjusted basis and $0.09 better than analysts were expecting. Microsoft did incur some extraordinary costs during the quarter, specifically a $450 million charge related to the permanent closure of its physical retail locations.

The gaming and Surface businesses were particularly strong, not surprising given the stay-at-home orders that were in effect for part of Microsoft's quarter. Xbox content and services revenue soared 65%, and Surface revenue was up 28%.

Despite the earnings beat, Microsoft stock was down about 1.8% by late Thursday morning. The company guided for productivity and business processes revenue for the first quarter between $11.65 billion and $11.9 billion, slightly below analyst estimates. Guidance for its other segments were in line with expectations.

While the guidance may be part of the reason Microsoft stock headed lower on Thursday, valuation may be playing a role as well. Shares of Microsoft have surged this year despite the pandemic, up more than 30%. The stock trades at a price-to-free cash flow ratio of around 37, the highest since the aftermath of the dot-com bubble in the early 2000s.

The pandemic hasn't derailed Microsoft so far, but a long recession would almost certainly hurt some of the company's segments. Business customers pulling back on IT spending, laying off employees, or failing outright would put pressure Microsoft's sales. Demand for PCs has been strong in recent months, driven by increased working from home, but that trend is unlikely to last if the economy doesn't stage a quick recovery.

With Microsoft stock near all-time highs, investors may not be accounting for the risks facing the company.

Analyst warns on Apple stock

Shares of Apple were also down on Thursday, off 1.6% by late morning. One reason for the decline: Goldman Sachs called the stock price "unsustainable" following a strong rally this year.

Goldman recommended that investors avoid Apple stock, predicting that earnings will come in far below analyst expectations. Goldman expects earnings for calendar year 2021 to be 16% below analyst estimates, driven by slowing growth in unit sales and average selling prices.

Apple is expected to launch iPhones featuring 5G technology later this year, although the jury is still out on how strong demand will be for pricey new gadgets in the current economic environment. Goldman doesn't expect Apple to provide any guidance when it reports its latest results. While Goldman is pessimistic on the stock, it did raise its price target from $263 to $299.

Like Microsoft, Apple is richly valued despite plenty of uncertainty facing the company. The price-to-free cash flow ratio stands around 26, the highest in at least a decade. Apple's growth prospects are almost certainly worse today than they were 10 years ago.

Apple will report its fiscal third-quarter results on July 30 after the market closes.