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Cramer: Amazon's Bezos won't cut off his nose to spite his face, or please Wall Street

Jim Cramer has faith in Amazon CEO Jeff Bezos, even after the company rocked Wall Street with its aggressive spending plans.

"On Wall Street you don't spring unexpected plans about the need for major spending without expecting a backlash of skepticism," the "Mad Money" host said.

Cramer saw this same situation play out when Under Armour CEO Kevin Plank revealed earlier in the week that his company needs to spend in order to grow and gain market share. Immediately the stock plummeted.

Wall Street translated spending to mean lower gross margins, and therefore lower profitability. It could also mean that demand wasn't as strong as many investors though, hence why Under Armour investors weren't willing to pay as much for the stock, as it is down significantly for the year.

"That is why the decision Amazon announced on its conference call to beef up spending freaked out so many investors, and that is why the stock dropped 5 percent today," Cramer said.





Jeff Bezos
Gary Cameron | Reuters
Jeff Bezos
"Jeff Bezos doesn't want to cut off his nose to spite his face, or please Wall Street." -Jim Cramer

However, the drop in Amazon's stock merely reflected a pattern of the past for Cramer. Time and again, Amazon's stock has risen and then pulled back when the company finds an opportunity to spend. It tends to spend where it thinks the return on its investment is worth it, though.

"Jeff Bezos doesn't want to cut off his nose to spite his face, or please Wall Street," Cramer said.

Bezos recognizes that Amazon cannot be constrained to the four walls of the spreadsheet, as analysts and money managers want. He can't provide a nice predictable earnings stream with predictable spending.

"Bezos takes his own counsel and he acts on it," Cramer said.

Many investors look back at a sell-off for a stock like Amazon and kick themselves for not buying the stock, even as they love Amazon Prime.

The reason is simple, Cramer said. They get scared off at the slightest bit of volatility in the stock. Every time there is a new round of spending announced, it always leads to a knee-jerk reaction, which makes the stock hard to own.

"You either have faith in Jeff Bezos or you don't. You either buy into his amazing success or you stick with something less volatile. For me though, this decline is simply one more buying opportunity in the long upward climbing road that Amazon has been traveling," Cramer said.

So while Cramer plans to buy more of Amazon's stock for his charitable trust, that doesn't mean investors should. Sellers may not be done unloading the stock, he said. The question is whether investors want to take advantage of the sale, even as this is just another drop in a predictable pattern for the stock.


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