Mad Money

Cramer says Zoom's post-earnings sell-off is not bad news for stay-home thesis

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Key Points
  • "Despite what you heard this morning, vast swathes of our economy remain very strong, and that includes the stay-at-home stocks," CNBC's Jim Cramer said.
  • "The truth is people are confused about Zoom and that confusion created opportunities all over the place today because the immediate pin action … was wrong," the "Mad Money" host said after Zoom shares sold off 15% after signaling in its quarterly report that revenue growth rate could be slowing.
  • "Just because Zoom's insanely high growth is decelerating a tiny little bit, that doesn't mean the trend is over," he said.
VIDEO2:5402:54
Jim Cramer on what Zoom's sell off means for the stay-at-home thesis

Zoom Video Communications shares sold off big on Tuesday after the company reported strong quarterly results, but it's not yet time to give up on the stay-at-home plays, CNBC's Jim Cramer said.

"Despite what you heard this morning, vast swathes of our economy remain very strong, and that includes the stay-at-home stocks," the "Mad Money" host said. "A good market can shake off discouraging news. A great market can ignore it entirely."

The comments come after the major averages kicked off the last month of 2020 with gains. The Dow Jones rose 185.28, or 0.63%, to a 29,823.92 close. The S&P 500 rallied 1.13% to 3,662.45 and the tech-heavy Nasdaq Composite climbed 1.28% higher to 12,355.11.

Zoom soundly beat top- and bottom-line estimates in its fiscal third-quarter report, which released Monday. But shares cratered 15% to $406.31 Tuesday after investors learned that the video conferencing company's mouthwatering growth rate powered by the pandemic could ease in the future.

The company posted $777 million of revenue in the quarter ended Oct. 31, up 367% from last year. While that growth rate is higher than the 355% of growth in the previous quarter, Zoom is expecting to grow revenue by about 329% in the fiscal fourth quarter.

Cramer said the stock, which is up nearly 500% year to date, was due for a pull back. However, he thinks it has no bearing on the overall stay-at-home investment theme.

"The truth is people are confused about Zoom and that confusion created opportunities all over the place today because the immediate pin action … was wrong," Cramer said.

By pin action, he's referring to the market phenomenon in which shares of one stock take down shares of a rival. Cramer calls it pin action because it's similar to the way in which one falling bowling pin can knock over another pin.

Investors on Wall Street as of late have been rotating gains from high-flying tech stocks into names that will benefit from the post-pandemic economy and other cyclical plays.

Cramer, though, is still advocating for a barbell investment strategy, where investors have exposure to both the stay-at-home and recovery plays.

"Just because Zoom's insanely high growth is decelerating a tiny little bit, that doesn't mean the trend is over," Cramer said. "In fact, I'd argue that it's never going away because this year has shown us that millions of jobs can be done better from home, no need for that central office."

VIDEO8:3608:36
Jim Cramer: The stay-at-home investing trend is not over

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