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Jim Cramer says Bernstein's downgrade on Costco creates a buying opportunity

Key Points
  • CNBC's Jim Cramer rebukes Bernstein's downgrade on Costco that sent the stock down more than 1.5%.
  • "The next time some analyst knocks down a best-of-breed stock with a cogent downgrade that's focused on valuation, you need to take advantage of that best-of-breed-opportunity weakness and you need to do some buying," the "Mad Money" host says.
  • "I'd give it a day or two more to make sure all the weak hands get shaken out. After that, though, I have no doubt that Costco's worth buying into weakness," he says.
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Bernstein's Costco downgrade a buying opportunity, says Jim Cramer

CNBC's Jim Cramer on Thursday predicted a new bearish assessment of Costco will induce a buying opportunity in the stock.

Earlier that day an A.B. Bernstein analyst downgraded the equity to underperform from market perform, citing "too high" valuation and that investors are "overestimating" its growth prospects. The analyst Brandon Fletcher was also concerned that customers would shop elsewhere if the economy continues to slow down.

Shares of the membership warehouse club fell 1.57% during the session. Cramer called it "the first real price break" in Costco's stock in the past year.

"The next time some analyst knocks down a best-of-breed stock with a cogent downgrade that's focused on valuation, you need to take advantage of that best-of-breed-opportunity weakness and you need to do some buying," said the "Mad Money" host, who ranks Costco among his so-called WATCH group of retailers with scale.

The acronym includes other giant retailers in Walmart, Amazon, Target and Home Depot.

"Costco is a best-of-breed retailer that has repeatedly reinvented itself, and if they need to reinvent themselves again, that's exactly what they'll do," Cramer argued.

He is convinced that the downgrade from Bernstein, an investment firm with $581 billion in assets under management as of June, will have an ephemeral impact on the Costco's shares. The stock price has run more than 41% this year — it was due for a pullback, but it should still be in your shopping cart, the host said.

Investors must be willing to "pay up for best of breed," he added.

"I'd give it a day or two more to make sure all the weak hands get shaken out," Cramer said. "After that, though, I have no doubt that Costco's worth buying into weakness."

WATCH: Cramer breaks down Bernstein's Costco downgrade

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Jim Cramer says Bernstein's downgrade on Costco is a buying opportunity

Disclosure: Cramer's charitable trust owns shares of Amazon and Home Depot.

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