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CNBC's Jim Cramer said Thursday that disappointing results from one company don't necessarily signal trouble for an entire industry.
Stocks fell Thursday, snapping a three-day winning streak as investors digested a fresh wave of corporate earnings. The Dow Jones Industrial Average and S&P 500 each slipped 0.4%, while the tech-heavy Nasdaq Composite dropped 1.4%. Cramer argued that investors are too quick to sell stocks alongside peers that are disappointing, overlooking key differences between businesses and creating potential buying opportunities .
"My motto: do the homework, know what the companies really do," the " Mad Money " host said. "That's the only way to profit from these short-term guilt-by-association moves, which tend to work themselves out."
He pointed to cybersecurity as a prime example. Fortinet's underwhelming quarterly results Wednesday dragged down shares of Palo Alto Networks and CrowdStrike , even though, Cramer argued, both competitors offer more comprehensive cybersecurity platforms. Unlike Fortinet, which is hardware-focused, Palo Alto and CrowdStrike provide broader suites of security products and services. Cramer said Fortinet has been losing market share to both companies, suggesting its weakness reflects company-specific challenges rather than a slowdown in industrywide demand.
"Their stocks should be bought, not sold, because Fortinet's weakness is not a tell about a slowdown in cybersecurity; it's just a sign that Fortinet itself isn't doing well," Cramer said.
He sees a similar disconnect in enterprise software, where ServiceNow's slight earnings disappointment Wednesday weighed on other software-as-a-service stocks, including Workday and Salesforce . Workday specializes in human resources and financial software, while Salesforce offers customer relationship management tools and its Agentforce platform.
"I am close to both Workday and Salesforce, and I can tell you that their declines today had more to do with weakness emanating from ServiceNow than anything having to do with the companies themselves," he said.
The pattern has emerged elsewhere in technology. Cramer pointed to Alphabet's disappointing earnings on Wednesday evening, which dragged down Microsoft despite the software giant's strong quarterly results . Similarly, Samsung's conservative outlook Thursday pressured Micron shares, "even as Micron's book of high bandwidth memory is much stronger than Samsung's. Another buy."
"Some of these guilty verdicts are downright absurd," he said.
Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club, owns shares of PANW, CRWD, CRM, GOOGL, MSFT, MU.
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