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When Cramer-fave MGM Resorts' stock plummeted more than 11 percent after its earnings report last week, the CNBC host couldn't believe his eyes.

"The selling here has been extreme," "Mad Money" host Jim Cramer said on Thursday. "Whenever we see this kind of action, we need to ask ourselves, are we looking at a broken company here — which means sell, sell, sell — or is it merely a broken stock?"

"In other words, is this the kind of development that makes you want to sell MGM for good, or are we merely getting a buyable pullback in a stock that still has a compelling long-term story?" he said.

Cramer has long recommended buying the stock of MGM, a hospitality giant with numerous hotel and casino properties in Las Vegas including the Bellagio and Mandalay Bay.

MGM became Cramer's favorite play on the domestic gambling space. While rivals like Wynn Resorts had better exposure to the fast-growing, gambling-focused Chinese territory of Macau, MGM offered investors who were wary about China a strong, U.S.-based play.

But since the marketwide January peak, shares of MGM have been sliding with the rest of the market, save for a small pop when MGM reportedly considered buying the ailing Wynn Resorts.

MGM's latest earnings report only made things worse for the stock. While the earnings and revenues beat analyst estimates, MGM's revenue per available room — a key metric for hotel operators — declined 4.3 percent.

To make matters even worse, management warned that the company's Las Vegas revenue per available room could see continued weakness and would likely need more time to recover.

"Put it all together and MGM's only looking for a 1 to 3 percent increase in Las Vegas Strip revenue per available room this quarter. That's not so great. The company also talked about additional margin compression in Vegas," Cramer said. "That's why the stock got clobbered — investors were hoping for much better."

To determine whether MGM was a broken stock or a broken company, Cramer asked one simple question: "is the long-term story intact?"

The "Mad Money" host liked MGM's long-term thesis. CEO Jim Murren guided toward a stronger second half of 2018 thanks to higher convention attendance in Las Vegas. The company is also seeing growth at its Washington, D.C., property, and has several hotels under construction in top locations including Macau.

All things considered, Cramer saw the hotel and casino giant's recent weakness as more of a short-term blip than the start of a longer term problem.

"Despite the hideous pullback in its share price, I think MGM Resorts is a broken stock, not a broken company," he concluded. "I don't blame anyone who wants to take profits here after MGM's monster multi-year run, but long term, I say you've got to buy this one. That's what you do with the broken stocks of very good companies."