Cramer suspects that it will be because Herbalife didn't fall apart, despite the company's settlement with the Federal Trade Commission last month that required it to change many of its practices. Noted activist and short-seller Bill Ackman, head of Pershing Square Capital, recently insinuated that the action taken by the FTC had a larger impact than even Herbalife realizes, when he stated on an investor call that "Herbalife actually has been shut down by the FTC, they just haven't realized it."
Based on this commentary, Cramer believes that Ackman will now double down on his negativity, rather than declaring victory that he helped to clean up some of the practices for Herbalife.
"He will do so, I believe, to prove that the FTC-mandated changes are bad for business. That is why if you are going to play the short game you have to come back to the fundamentals," Cramer said.
With fundamentals in mind, Cramer struggled to determine what the normalized earnings power should be for Herbalife. Earnings power of $4.80 is impressive, but the company isn't as strong as even Bristol-Myers Squibb, he said.
In the end, Herbalife is a supplements business. GNC currently trades at a 7 times multiple. Assuming Herbalife deserves double the price-to-earnings multiple of GNC because of its faster growth rate, Cramer calculated it is $67 a share. Herbalife closed at $67 on Thursday.
"You are dealing with a stock that seems fairly valued, which means the only reason to own it here is because you're expecting a short squeeze," Cramer said.
Investors that make that bet either believe Ackman will cover, or Herbalife will go private again. Both are unlikely for Cramer. That means Herbalife is nothing but a supplements company that trades off points, and that's not enough to take the stock dramatically higher.
"I can't endorse this one until Herbalife can demonstrate sustained earnings power with the changes to the business model, and for that all we can do is wait and see," Cramer said.
Square shot up 8 percent on Thursday after it also reported better-than-expected earnings. In addition to payment processing, Square also makes loans to small and medium sized customers. And while Cramer has always said it is hard to value a company plagued with credit risk, some of those fears were alleviated with the latest earnings report.
"I heard a lot of people say this stock surged because the company reported better than expected revenues, but I think that's a mistake. I believe Square's going higher because they explained their credit exposure to merchants in a way that made us feel like we no longer need to be concerned that Square is some kind of wayward bank masquerading as a tech company," Cramer said.
That translated Square into a high-growth loss-making company in the very competitive payments space. Cramer estimated that the stock was worth more than it was on Wednesday, but not more than the huge gain it had on Thursday because of the tough payment environment.
Cramer's ultimate target for Square was its all-time high price of $15. However, risk has grown for small-to-medium sized retailers since it hit that price in March.