CNBC's Jim Cramer said he thinks tech giants Netflix and Tesla will be only temporarily dinged by their stocks' drops on Thursday and will rebound.
Both companies saw fraught earnings reports Wednesday night. Netflix showed positive subscriber numbers, likely due to a crackdown on password sharing, however the company gave a tepid forecast. Tesla CEO Elon Musk announced an exorbitant spending plan to make the company a dominant provider of full self-driving cars. Investors may have balked at the hefty price tag of a plan that could take a long time to come to fruition, Cramer said.
"The thing is, every time these stocks swoon, the declines look so justified, so reasonable ,that they scare people away," Cramer said. "But when you've got fantastic management and phenomenal products, you tend to win out over the long term, despite these speed bumps."
Cramer pointed to the endurance of these companies, stressing that investors shouldn't get too caught up in "short-term hiccups." He said Netflix is transforming its business model into a streaming service with a cheaper subscription plan that includes advertisements.
According to Cramer, Netflix has shown that it can make more money with consumers using its ad-tier plan than its pricier traditional subscription. He said he thinks this plan will enable Netflix to raise its subscription prices while also making money on ads. Although the project is still in its infancy, Cramer thinks it will be a game-changer for Netflix's profitability.
Cramer also emphasized that Tesla CEO Elon Musk has "never been bound by the four walls of the quarterly report canvas." He said the automaker's dominion could expand beyond electric vehicles and into self-driving cars, batteries, design, pickup trucks and more. Tesla could also create another giant revenue stream by licensing its self-driving car technology to other auto companies.
"If history is any guide, they are absolutely not done going down for the moment. There's plenty of big money rotating to other sectors and that tends to take two or three or four, maybe even five days. Don't forget we've got that Nasdaq-100 rebalancing tomorrow," Cramer said.
"But make no mistake, Netflix and Tesla are two of the greatest investments of all time, and I got nothing, heard nothing at all last night that makes me feel differently about them. All that has happened is that you're going to get the stocks even lower, maybe a week or two from now."
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