When a $122 stock has a big swing in one day, like Boeing did on Wednesday, then Jim Cramer gets suspicious.
Generally, this means that something has gone wrong. Either there was a problem with the reporting process in general or with the stock in particular. That leaves investors to wonder if someone misled them, creating a false sense of positivity.
But that's not always the case, explained Cramer. He uses the case of Boeing as a cautionary tale, not about the company itself, but about how analysts can perceive a stock. He says that's what led Credit Suisse to downgrade such a strong stock on Thursday.
Taking a look back, investors breathed a sigh of relief on Wednesday when Boeing reported and raised its guidance substantially. The stock traded higher at first but then quickly unraveled after the company conference call.
What happened?
The call revealed that the boost in earnings came from a wide range of Boeing planes, mostly older versions. Earnings did not come from the brand new 787 Dreamliner. As a result, investors assumed the worst, and the stock was crushed.
"I don't know what Boeing could have done more right when it reported. Was the company supposed to say 'earnings raised despite Dreamliner'?" said Cramer.
The "Mad Money" host reminded investors that earnings and cash flow are real, regardless of how they are made.
The problem, in his opinion, is in the process. Cramer has always been a proponent of doing your homework before investing. Those who didn't do their homework were freaked out by the conference call and ran for the hills.
At the end of the day, Cramer thinks that the 12-point swing was not the fault of Boeing management.
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"You can blame them for not getting the Dreamliner right, but you can't blame them for investors jumping the gun."
As a result, those who had weak hands were slammed on Wednesday's selloff. They were slammed even harder when Boeing had a magnificent rally on Thursday as well.
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