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Cramer: I was wrong—run far away from this stock

"Now, look, I got La Quinta wrong. Mea culpa. I should have been more skeptical and less willing to believe the CEOs exuberant bullishness" -Jim Cramer

Jim Cramer was shocked Thursday when La Quinta, a company that he has liked for a long time, was hit with disaster— ultimately causing Cramer to throw his entire bull thesis for the stock out the window.

La Quinta Holdings is the select-service hotel chain with about 870 locations. The "Mad Money" host has recommended the stock multiple times, largely because of the positive commentary from the company's long-time CEO, Wayne Goldberg.

That was until last Thursday, when Cramer was hit with two jarring surprises from the company.

First, the CEO announced he was stepping down effective immediately. La Quinta did not cite a real reason for the exit; Goldberg simply said he had fulfilled his goals and it was a good time to look for new opportunities.

"But if that was the whole story, why not give investors a heads up and announce he's retiring in a few months?" Cramer asked.

This move was especially disturbing to Cramer, as Goldberg had been the president and CEO of La Quinta since 2006. He took the company public in 2014, and then suddenly resigns with no warning, pretty much overnight?

That was a major red flag to Cramer, as it is never a good sign for a longtime CEO to step down immediately for no particular reason.

The second blow came when La Quinta cut its full-year financial guidance for the second time in two months. It had a vicious downward revision of its revenue per available room, guiding to a range of 3.5 to 4.5 percent from 6 to 7 percent.

On top of that, the company cut its earnings before interest, taxes, depreciation and amortization forecast to a range of $393 million to $400 million, down from $398 million to $404 million. It blamed weaker-than-anticipated hotel demand during August and September.

The very next day, La Quinta dropped 15 percent, down to its April 2014 IPO price of $17.

And while La Quinta approved a $100 million accelerated buyback program, Cramer thinks this move is just plain desperate. He thinks the company is flailing and looking for a way to prop up its stock price.

"At this point, I have to tell you that I think it's not too late to sell La Quinta. In fact, if you own this stock my recommendation is that you run—don't walk—away from it," Cramer said. (Tweet this)

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One of the main reasons why Cramer liked this stock so much is because La Quinta's CEO was so bullish on his appearances on "Mad Money." Goldberg's sudden exit from the company is a gamechanger for Cramer.

"Now, look, I got La Quinta wrong. Mea culpa. I should have been more skeptical and less willing to believe the CEO's exuberant bullishness," Cramer said. (Tweet this)

So, when the facts change, you must change your mind. And the facts have changed with La Quinta. When this kind of disaster strikes, Cramer says investors must be willing to admit that they got it wrong and walk away. Don't try to convince yourself that the pullback is a buying opportunity.

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