CNBC’s Jim Cramer on Wednesday said a company’s guidance can make or break its stock in this tricky market environment.
“Welcome back to a very skittish market, one where investors aren’t interested in how you did, they only care about what you say you’ll do in the future,” he said. “So, if you aren’t offering a healthy, sharply better-than-expected forecast, well your stock is instant roadkill.”
As Wall Street senses a slowdown, guidance can have more impact on a stock than it should, according to Cramer. Cramer gave several examples of companies that recently reported solid quarters, but saw their shares sink due to less-than-ideal guidance, including Walt Disney, Datadog, Uber and Upstart.
Disney topped earnings expectations when it reported on Tuesday. In a vacuum, Cramer said these figures could have sent shares soaring, but investors balked when CFO Hugh Johnston said, “We are seeing some evidence of a global moderation from peak post-Covid travel,” on the company’s conference call. Disney’s stock sank about 10% on Monday in response to the news and didn’t recover on Tuesday.
Cramer said that investors could potentially buy some of these stocks if the Federal Reserve were to start cutting interest rates. But to him, it’s important to keep in mind how much soft guidance can affect stocks right now.
“Now, there are times when I think we need to take all of these forecasts with a grain of salt,” he said. “You need to understand that in this market, even though the guidance is just the guidance, right now the guidance is all that matters.”
Disney, Datadog, Uber and Upstart did not immediately respond to a request for comment.
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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Walt Disney.