It's been less than six months since Amazon announced its deal to buy Whole Foods, but for CNBC's Jim Cramer and many of the country's supermarket chains, it's felt like years.
"On that fateful day, June 16, the whole supermarket sector got beaten to a pulp, with many of the grocers seeing their stocks fall 5 to 10 percent in a single session," the "Mad Money" host said. "The whole group suddenly needed to be re-rated lower now that the retail Death Star had them in its crosshairs."
Initially, the declines were brutal: Supervalu shed 14.4 percent, Kroger dropped 9.2 percent, Costco fell 7.2 percent, Sprouts sank 6.3 percent and Target and Wal-Mart each slid about 5 percent.
The grocers' weakness continued for several months. Cramer said that it felt "like an Armageddon" for the group, which saw Amazon as the ultimate bringer of doom.
But lately, the cohort has reversed, with many of the leading stocks up 20 to 40 percent from their summer lows.
Oddly enough, much of the group is trading above where it was before Amazon announced the Whole Foods deal, so Cramer investigated to find out what the positive action might mean.
"How is it that supermarket stocks have managed to rebound? Isn't Amazon totally toxic to anyone it competes with?" he wondered. "Sure, nobody in their right mind wants to go up against Amazon — I mean, maybe CVS did this big deal with Aetna because they're worried — but entire industries don't come undone in a single day."
Simply, Wall Street got ahead of itself, the "Mad Money" host said. As soon as Amazon made its takeover public, analysts raced to slash their estimates on every possible competitor.
What they didn't account for was the near term. Amazon has yet to expand Whole Foods' several hundred stores to a level that truly competes with local supermarkets, even though it would likely pose a serious threat once that was complete, Cramer said.
The grocers' latest earnings results only confirmed that the analysts jumped the gun. Kroger delivered strong results last week. Supervalu beat Wall Street estimates in October. Costco reported better-than-expected earnings and Sprouts. Target and Wal-Mart followed suit.
Additionally, Wal-Mart upped its forecast and announced a $20 billion stock buyback, a whopping 8.5 percent of its market cap at the time.
Still, Cramer acknowledged that the long-term outlook is bleak for some. Supervalu, for one, was too risky for him to recommend, even though he felt more secure about Kroger, Sprouts, Costco and Wal-Mart (which he saw as the only true challenger to Amazon).
And with corporate tax cuts on the horizon, Cramer said that he couldn't blame the buyers who believe that the worst is over for the supermarket chains, which may soon pay lower tax rates.
"Here's the bottom line: when Amazon declares war on a particular industry, it's not an immediate death sentence for the incumbent players," Cramer concluded. "Sure, Amazon crushed the bookstores and the record stores, but it took many, many years to play out and their balance sheets weren't as good as some of these. That's why the sell-off in the supermarket stocks ... was excessive, and why I think these stocks can continue to climb even after the huge rebounds that they've already had."
WATCH: Cramer tracks the grocery stock comeback
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