CNBC’s Jim Cramer on Thursday reminded investors to always follow their heads over their hearts when betting on a stock, using Facebook-parent Meta‘s most recent quarter to make his point.
CEO Mark Zuckerberg “pulled a rabbit out of a hat back in the day when Facebook went from a desktop play to a cellphone play and then did it again when he bought Instagram and turned it into a social media powerhouse. But he couldn’t do it this time,” the “Mad Money” host said.
“The lesson, of course, is that as compelling as it is to believe in someone – I call it the ‘great man theory of investing’ – it almost never works over the long haul,” he added.
Meta missed on earnings and revenue in its latest quarter and issued a soft forecast. The company saw struggles to monetize Reels and noted headwinds from the Russia-Ukraine war, persistent inflation and uncertainty about an economic slowdown.
Shares of Meta have lost about half their value since the start of this year.
While the stock fell further after the company’s disappointing quarter, Cramer noted that the decline means it is now less risky.
“When no one’s expecting growth and you don’t get growth, but you get pricing discipline, cash can build — they have $40 billion in the bank and bought back $5 billon worth of shares just this quarter — a stock tends to get a pass,” he said.
Disclosure: Cramer’s Charitable Trust owns shares of Meta.
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