Whether a huge drop in a stock represents a buying opportunity or a big red flag depends largely on the industry at this time, Jim Cramer said Wednesday.
Such was the case for Skyworks Solutions and PayPal, whose shares fell on disappointing earnings reports.
In theory, PayPal should have been the buying opportunity for both, Cramer said. The digital payments company reported increases in sales and profits, but only shared weaker-than-expected guidance for the current period.
However, it fell anyway because it “lives in the wrong neighborhood,” Cramer explained. “PayPal was once the darling of e-commerce. Nowadays it’s more like a bank and right now bank stocks are poison.”
Meanwhile, Skyworks, a semiconductor company, was saved by its technical connections.
In its earnings announcement, Skyworks did not blame its biggest customer, Apple, for the losses. Instead, the company blamed Android and smaller Chinese phone makers. For Cramer, this was the secret ingredient that helped Skyworks recover better than PayPal, as China seems primed for a robust comeback based on earnings reports from other companies currently operating there.
Ultimately, it would come down to the viability of a particular industry, he explained.
“My advice is simple: tech explosion? Consider it one.” [possible buying opportunity,]said Cramer. “Financial slur? Let’s just say take a hard pass.”
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