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On his show Friday, the "Mad Money" host called out stock analysts like Everscore ISI's Anthony DiClemente who have downgraded the equity over concerns about subscriber growth.
"I think this is lunacy," said Cramer, who has been bullish on the music streaming platform since it went public last April. "It's like the market just doesn't know how to read this company or its quarterly guidance. In my view, Spotify is very much on the right track."
The stock was rocked after a seemingly mixed quarterly earnings released Wednesday, Cramer said. After Spotify reported lower-than-expected sales, tight cash flow and conservative guidance across the board including subscriber growth, shares sold below $129 at one point in Thursday's session.
But Cramer noted that the company beat expectations on operating profit and gross margin, which was 120 basis points higher than was asked for.
"I think the sellers were missing a lot of context here and the context is something I like to talk about a lot and it's called UPOD. They under promise ... and then they over deliver," he argued. "At this point, CEO Daniel Ek and his team have established a track record of giving cautious guidance—under promise—and then beating it—over delivering."
Spotify rose 2.68 percent Friday to close at $134.71, which is nearly 20 percent higher year to date and more than 30 percent higher than its recent low during the December sell-off.
The music player is a subscriber growth story with 116 million monthly users—supported by ads—and 96 million subscribers, Cramer said. Monthly active users grew 29 percent year over year and premium subscribers grew 36 percent, which beat expectations, he added.
"I think the positives more than outweigh the negatives here," Cramer said.
He also highlighted that Spotify has a 9 percent interest in Chinese music streaming company Tencent Music and has planned as much as $500 million worth acquisitions this year. Earlier this week, CEO Ek told CNBC he wants to make Spotify "a Netflix type of story" in investments as it makes a play for podcast companies Gimlet Media and Anchor.
Spotify's guidance includes planned investment costs and the company could "become the premier platform for podcasts," a hot market for hard-to-reach millennials, Cramer said.
"That put a very different spin on Spotify's forecasts for me because I'm looking at this closely, but not for many other people" he said. "I think they can make a killing if they become the de facto podcasting platform."
So the bottom line is to understand the full story, don't misread, and give credit for their ability to under promise and over deliver. That's how you can make some money.
"That's why I think Spotify is an incredible buy down here," Cramer said. "We are in a subscription economy people, and it's mighty difficult to top this one."