Netflix‘s weak subscribers numbers debunked the “sky’s the limit” theory surrounding the stock, and now investors are taking profits, CNBC’s Jim Cramer said Tuesday.

Shares of Netflix were tanking about 8 percent in midmorning trading Tuesday after the streaming giant reported membership growth numbers that came in below analyst forecasts. But so far in 2018, the stock has just about doubled in value.

“When you miss a number like this, suddenly, it’s like this loss has a thousand fathers,” Cramer said on “Squawk on the Street.” “It [still] has great growth.”

Netflix is seen a “momentum stock” and can’t have one more disappointing quarter again, argued Cramer, adding the results are prompting investors to ask questions they’ve never asked before, including what’s the actual size of the U.S. market for streaming and is it saturated.

“All I ever heard was the sky’s the limit, sky’s the limit, sky’s the limit,” he said.

Several Wall Street analysts are downplaying Netflix’s subscriber miss, remaining optimistic over the company’s attractive long-term prospects.

But others like Barton Crockett, media analyst at B. Riley FBR, predicted Tuesday that Netflix’s less-than-stellar second-quarter results may indicate the streaming video giant is hitting a “maturity wall.

The idea of a possible “maturity wall” speaks to whether Netflix might start being valued and traded on its actual financial performance rather than the idea that it can’t be beat.

“If that’s the case, then [the stock] needs to be reset,” he said on “Squawk Box,” giving the name a fair value of $313 per share, which would represent another 14 percent decline from early Tuesday levels.

Cramer, the host of “Mad Money,” said Monday that Netflix’s disappointing results could give investors an opportunity to buy into other high-quality tech stocks.

Source: Tech CNBC
Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock