Jim Cramer, the host of CNBC’s “Mad Money,” has emphasized the significance of a company’s guidance in the current market environment, stating that it can significantly impact stock performance.
What Happened: Cramer, in his recent show, highlighted the crucial role of a company’s future guidance in determining its stock’s fate, reported CNBC on Wednesday.
"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."
He noted that even companies with strong quarterly results, such as Walt Disney Co DIS, Datadog Inc DDOG, Uber Technologies Inc UBER, and Upstart Holdings Inc UPST, experienced stock declines due to less-than-ideal guidance.
Disney’s shares dropped by around 10% after its finance chief, Hugh Johnston, mentioned a “global moderation from peak post-Covid travel” during the company’s earnings call.
Cramer suggested that investors could consider buying these stocks if the Federal Reserve were to start cutting interest rates, but he also stressed the current significance of soft guidance on stock performance.
“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.”
Why It Matters: Earlier this week, Cramer advised investors to brace for an economic slowdown and suggested strategies to navigate the challenging period. He emphasized the importance of maintaining a balanced portfolio amid the ongoing economic slowdown and urged investors to be prepared for potential losses.
Meanwhile, investment strategist Ed Yardeni warned about a potential stock market “melt-up” driven by Federal Reserve rate cuts. Yardeni highlighted the re-emergence of the “Fed Put” concept, suggesting that the Fed will intervene with interest rate cuts to prevent economic downturns, potentially leading to a stock market melt-up.
On the other hand, Tom Lee, the head of research at Fundstrat, suggested that the recent inflation figures for March have been higher than expected for the third consecutive month. He attributed the elevated readings to delays in official statistics, pointing out that real-time home and rent prices are stabilizing. He advised investors to consider purchasing stocks this month, citing a forthcoming significant decline in inflation.
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