The market could reach an ‘investable’ bottom after analysts cut earnings estimates, Jim Cramer says

CNBC’s Jim Cramer on Thursday said that a possible upcoming slew of earnings estimate cuts from analysts could create a sell-off and an opportunity for investors to do some buying.

“Over the next few weeks, before earnings season gets rolling, I expect the analysts to hit us with some preemptive estimate cuts while more companies hit us with negative preannouncements,” he said.

“That’s going to be bad for the averages, but once the sell-off hits and we get over the estimate cuts for 2022 and 2023, that’s it. That’s when we will have not a tradeable bottom like this one, but an investable one,” he added.

The “Mad Money” host’s comments come after a turbulent earnings season roiled by inflation saw companies falling short of Wall Street expectations.

Cramer said that he believes analysts’ consensus earnings estimates for the stocks in the S&P 500 are too high, and they need to come down because markets don’t bottom unless bad news is baked into stock prices.

“They’re predicting 8% growth, followed by 11% next year. I find that hard to believe. Eight percent to eleven percent earnings growth is basically what you’d expect in an average year,” he said.

He pointed out that there have been several companies in recent weeks that reported great quarters but disappointing guidance.

“You had these really great quarters, but they are saying things are getting weaker. People like them because they think the estimate cuts are finally done. I’m not sure,” he said.

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Disclaimer

CNBC’s Jim Cramer on Thursday said that a possible upcoming slew of earnings estimate cuts from analysts could create a sell-off and an opportunity for investors to do some buying.

“Over the next few weeks, before earnings season gets rolling, I expect the analysts to hit us with some preemptive estimate cuts while more companies hit us with negative preannouncements,” he said.

“That’s going to be bad for the averages, but once the sell-off hits and we get over the estimate cuts for 2022 and 2023, that’s it. That’s when we will have not a tradeable bottom like this one, but an investable one,” he added.

The “Mad Money” host’s comments come after a turbulent earnings season roiled by inflation saw companies falling short of Wall Street expectations.

Cramer said that he believes analysts’ consensus earnings estimates for the stocks in the S&P 500 are too high, and they need to come down because markets don’t bottom unless bad news is baked into stock prices.

“They’re predicting 8% growth, followed by 11% next year. I find that hard to believe. Eight percent to eleven percent earnings growth is basically what you’d expect in an average year,” he said.

He pointed out that there have been several companies in recent weeks that reported great quarters but disappointing guidance.

“You had these really great quarters, but they are saying things are getting weaker. People like them because they think the estimate cuts are finally done. I’m not sure,” he said.

Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

Disclaimer