The reasoning behind LinkedIn’s weak forecast was that management stated that they see serious weakness in Asia Pacific, Europe, the Middle East and Africa. That was a major departure from what other companies in this group said.
LinkedIn also predicted continuous weakness, which was scary because it gets 40 percent of its sales outside of the U.S. Suddenly investors understood how vulnerable LinkedIn is to macro-economic weakness. Less hiring means less demand for its core recruitment services, and that totally changed the way the stock was viewed.
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“There is real worth here, but the firm’s credibility is most likely shot until we see a good quarter, and we know that is not going to happen for another three months because they just reported,” Cramer said.
As for Tableau, its guidance was also a disaster for next quarter and the 2016 fiscal year. Analysts quickly downgraded the stock, and it plunged 49 percent Friday.
On the conference call, management acknowledged that cheap low-end analytics products were playing a role in the company’s slower growth. This led many investors to realize the space could be more crowded and difficult.
Additionally, Tableau had a sharp deceleration in its core licensing revenue. Management said customers were being more cautious with spending, and existing customers aren’t giving more business as fast as they used to.
Cramer considers the real problem with these two stocks to be the reverberations they caused to the rest of the group. Stocks like Splunkwere obliterated simply due to guilt by association.
“These other companies may be doing just fine, but until we are sure the forced selling by troubled hedge funds is over, I think you need to avoid both groups. Just too risky,” Cramer said.