There’s nothing stopping former ‘market darlings’ from dropping prices, says Jim Cramer.
CNBC’s Jim Cramer on Friday warned investors that shares of some of the newer companies that have seen resounding success during the pandemic are continuing to slide and this could be just the beginning. .
“When your stock doesn’t have any dividend support and doesn’t have a fair valuation relative to earnings — assuming it even has earnings — then there’s no floor in this market. If you’re on your own How low can it go?The answer is almost always lower, “the”Crazy money” said the presenter.
“Never confuse a big drop with a bottom. They are not synonymous,” he added.
Shares fell on Friday after Consumer price index in May showed hotter-than-expected inflation figures.
Among the stocks that fell today are Repairs and DocuSignwhich Cramer highlighted are two names that illustrate his warning about investing in high-flyers.
Shares of Stitch Fix, which has seen a boom during the pandemic as consumers turn to online shopping, fell 18% on Friday, after the company announced layoffs on Thursday and let know they expect revenue to drop in the fourth quarter.
The company hit a 52-week low of $6.18 earlier in the day, down from a 52-week high of $64.52 reached nearly a year earlier.
DocuSign, another pandemic winner, saw its stock plummet 24% after it miss Wall Street’s expectations revenue and earnings for the most recent quarter.
The company also hit a previous 52-week low at $64.30, well below the 52-week high of $314.76 reached last August.
“These newer stocks, the ones that were made in the last three, four, five years, they’ve been awfully expensive before they peaked … maybe even before they go public, so so when their businesses go bad, they can go very, very far, says Cramer.
He added that despite the sharp drop in DocuSign, he still doesn’t think the stock is cheap enough to buy. For Stitch Fix, stock is unbuyable until the company’s core business stabilizes, he said.
“We don’t care where the lovers in this market have been.… We just care where they go,” he added.
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