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Sell Netflix now and regret it later, says Cramer

Tuesday, 23 Jul 2013 | 6:53 PM ET
No Huddle Offense: The Netflix play
Tuesday, 23 Jul 2013 | 6:58 PM ET
Mad Money host Jim Cramer shares his final thoughts of the day.

(Click for video linked to a searchable transcript of this Mad Money segment)

With the company's outlook disappointing investors, Netflix again has become the stock the Street loves to hate.

Shares of Netflix fell on Tuesday after the company released a forecast that disappointed. Although Netflix said it expects to increase customers by 1.5 million in the current quarter, shareholders still went running for the exits. With the stock up as much as 180% this year, they were looking for more robust growth to justify current valuations.

Cramer, however, thinks dumping Netflix at current levels may be a decision that sellers come to regret

"Yes, the number wasn't as strong as some were hoping for, but the number was still pretty darned good," Cramer said.

And results beat expectations, Cramer reminded. Net income rose to $29 million, or 49 cents a share, in the second quarter. Analysts had expected 40 cents a share on $1.07 billion in revenue, according to a consensus estimate from Thomson Reuters.

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Also, the Mad Money host reminded, Netflix just made history as the first online streaming network to receive 14 nominations for the Primetime Emmy Awards. Cramer thinks the Emmy nods reflect the rise in the popularity of Netflix.

In fact, Cramer laid out a comprehensive fundamental argument for buying Netflix on Tuesday April 23rd. Click here to go to 'Consumed with disdain, Street missing Netflix virtues.'

Netflix
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Netflix

As compelling as Cramer's fundamental argument might be – there's a much bigger reason not to sell right now.

"This market makes you afraid to sell," Cramer explained.

That is, over the past few days and weeks a string of companies let down the Street. "And yet, a few days later they came back and in some cases traded higher than where they were when they reported results the Street didn't like," Cramer said.

The Mad Money host said the trend is wide ranging and happening across a many different sectors with Google, 3M, and Coca-Cola all following suit.

"To me there's a case to be made here that the seller's remorse we saw in the aforementioned stocks could grip the shares of Netflix, too," Cramer said. Therefore, at current levels Cramer would be cautious of selling. "If it follows the pattern of the others, it just might be a buy in a couple of days," Cramer said.




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