“You know what? I think the stocks of these two companies could reverse and go higher after a couple of days of selling,” the “Mad Money” host said. “It has to do with the way they handle their conference calls after they report their earnings, and how they approach their investor bases and make their promises.”
Cramer began with Tesla. The automaker posted a larger-than-expected loss in the third quarter due to production problems with its Model 3 sedan.
Elon Musk, Tesla’s outspoken CEO, tried to mitigate analysts’ concerns on the conference call, acknowledging the production issues but saying that, once they’re fixed, Tesla could become a production machine with the highest profitability in the industry.
The Street responded in kind, sending shares of Tesla down nearly 10 percent on Wednesday. But individual investors could respond differently, Cramer said.
“There’s a retail investor cohort who actually cares about different things,” Cramer said. “You gotta have faith, and individual investors, they’ve got just that when it comes to the stock of Tesla. They believe in Tesla, which is why they’ll soon come in to buy the stock because they love the car and they don’t care about things like profit or gross margins or earnings per share.”
Musk’s followers tend to forgive his over-promising and under-delivering, even if the analysts who cover Tesla don’t. Cramer said that he could see Tesla’s stock withstanding another round of financing on the faith of its fans.
Facebook’s third-quarter earnings report beat analyst estimates, but the company’s situation is different, Cramer said.
The social media giant’s management tends to under-promise on conference calls, like in 2016 when they said they expected Facebook’s ad revenue growth rate to “come down meaningfully.”
After this quarter, shares of Facebook fell on the company’s statements that countering bad actors like Russian hackers on its platform will significantly impact profitability.
“Facebook’s stock was up 4 [basis] points before [CEO Mark] Zuckerberg said that and added, ‘protecting our community is more important than maximizing our profits,'” Cramer said. “I think this comment’s just like the ad slowdown comment. It’s done to temper expectations as well as make it clear to Congress that Facebook’s good actors.”
So, even as neither conference call inspired much near-term confidence, Cramer pointed to the statistics: Tesla’s stock is up 50 percent for 2017 and Facebook’s stock is up 58 percent.
“They both have their narratives, one hopelessly upbeat, the other ridiculously downbeat, and both work longer term even with the short-term pressure they’re under,” the “Mad Money” host said. “Two different strategies, same stock results a few weeks later, as the stocks first go lower and then climb right back up again.”