Cramer: Investors must not rush to judgment right after an earnings report

  • Investors must avoid making snap judgments about quarterly earnings and other corporate headlines before buying or selling a stock, CNBC's Jim Cramer said Thursday.
  • The "Mad Money" host said the negative initial reaction to Snowflake's financial results shows why it's important to thoughtfully digest the numbers.

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CNBC's Jim Cramer on Thursday reminded investors to thoughtfully digesting earnings and other corporate news before making a decision to dump or purchase a stock.

"Why can't we just take earnings at face value and immediately decide that something is either good or bad? Because it takes time to assess new information," the "Mad Money" host said. "Just like anything else when you rush to judgment in the stock market, you're going to make mistakes. That's why you can't rely on the first blush to determine how a company is doing."

Cramer pointed to Wednesday's earnings report from Snowflake as an example. Shares of the data-analytics software firm tumbled as much as 8% in extended trading, before trimming those losses.

"If you bothered to listen to CEO Frank Slootman on last night's show, you would've been a buyer, not a seller, because it was a brilliant quarter," Cramer said, noting that Snowflake shares ultimately rose more than 4% Thursday after starting the session lower.

"The second blush," Cramer said, proved to be "much more accurate."

Beyond Meat's stock move Thursday also demonstrates the need for due diligence before making an investment decision, Cramer said. Shares of the plant-based meat maker popped 12.5% to close at $142.61 per share.

"At first blush, you might think Beyond Meat's setting itself up for a big quarter thanks to its deals with McDonald's and China KFC," Cramer said.

However, there's more to the stock move than just those positive business developments, he said. Specifically, Cramer said Reddit's WallStreetBets forum — known for influencing meme stocks like GameStop — appears to be playing a role.

"They're simply trying to break the short-sellers here, because 25% of the float is sold short. The action tells you nothing about the fundamentals, although I do predict … more pain for the shorts," Cramer said.

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