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Cramer: Disney is the stock to watch

CNBC's Jim Cramer said Thursday that investors should watch Disney shares for clues as to where this market is going, especially after the company was downgraded.

"I read through that downgrade multiple times. It reads horribly, except for the fact that [the analyst] is not negative on the earnings," Cramer said on "Squawk on the Street."

Mickey Mouse on the red carpet at the 2015 D23 Expo in Anaheim, Calif.
Harriet Taylor | CNBC
Mickey Mouse on the red carpet at the 2015 D23 Expo in Anaheim, Calif.

"This is really what's wrong with the market. We want to pay less for even the highest-quality companies," Cramer added. "Be aware that we can bounce, but it's all about bouncing and staying in a range where the stair step is going down this time, not up."

Read MoreWhy it might not be time to dump Disney shares

Earlier Thursday, Sanford C. Bernstein downgraded the media giant's stock to "market perform" from "outperform," citing the lack of a new framework within the media sector as a source of risk.

"We believe a whole new framework is necessary to meaningfully address that question. Where the stocks/sector have traded historically is irrelevant. The world has changed too much," Bernstein said in a note. "We have come to believe the affiliate fee revenue stream deserves a higher risk premium than it did before."

Disney shares were down more than 4 percent Thursday morning.

Disclosure: Cramer's charitable trust did not own DIS shares when this article was published.