Corporate Earnings Whipsaw Tech Stocks as Shares Fall

Fortinet’s disappointing quarterly results dragged down shares of Palo Alto Networks and CrowdStrike on Wednesday, and Jim Cramer said investors were treating separate companies as if one earnings report spoke for an entire industry. The next day, stocks fell and ended a three-day winning streak as investors weighed a new 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%.

One company’s numbers, everyone’s exposure

Cramer argued that investors sell stocks alongside disappointing peers too quickly, overlooking differences between businesses and possible 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.”

That market reaction gives one company’s results reach beyond its own business: Fortinet’s report weighed on two competitors, though Cramer said their products and market positions differ. Fortinet is hardware-focused, while Palo Alto Networks and CrowdStrike provide broader suites of cybersecurity products and services. Cramer said Fortinet had been losing market share to both companies, and described its weakness as company-specific rather than evidence of a wider slowdown in cybersecurity 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. That was his investment judgment, not a neutral verdict handed down by the market. The shares nevertheless moved together after Fortinet’s results, showing how quickly one corporate report can shape the fortunes of other publicly traded companies.

The spillover reaches software and chips

ServiceNow’s slight earnings disappointment on Wednesday also weighed on other software-as-a-service stocks, including Workday and Salesforce. Workday specializes in human resources and financial software; Salesforce offers customer relationship management tools and its Agentforce platform. Cramer said the declines reflected weakness emanating from ServiceNow rather than problems at those companies themselves.

“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. Investors were responding to a connection between firms, Cramer argued, even where he said the businesses’ own results didn’t explain the move.

Alphabet’s disappointing earnings on Wednesday evening weighed on Microsoft despite the software company’s strong quarterly results, Cramer said. Samsung’s conservative outlook on Thursday pressured Micron shares. Cramer said Micron’s book of high bandwidth memory was much stronger than Samsung’s and called Micron “Another buy.”

Who’s giving the verdict—and who benefits

“Some of these guilty verdicts are downright absurd,” Cramer said, describing how shares can fall alongside a company whose results investors dislike. But his commentary also came with a disclosed financial stake: Cramer’s Charitable Trust, the portfolio run by CNBC’s Investing Club, owns shares of PANW, CRWD, CRM, GOOGL, MSFT and MU. His recommendations and his portfolio positions therefore appeared in the same account.

The article described stock movements and Cramer’s analysis; it reported no grassroots organizing, mutual aid, or direct action in response. It also offered no election or legislative remedy. Instead, CNBC included an invitation to sign up for the Investing Club, a phone number for questions to Cramer, social media links for Mad Money and Jim Cramer, and an email address for questions, comments or suggestions about the “Mad Money” website. The market’s verdict travels fast. So does the pitch to join the club.