[rotated_ad] Nothing’s stopping former ‘market darlings’ from falling, warns Jim Cramer -

Nothing’s stopping former ‘market darlings’ from falling, warns Jim Cramer

On Friday, CNBC’s Jim Cramer warned investors that shares of some new companies that have had tremendous success during the pandemic are continuing to slide, and this may just be the beginning.

“When your stock doesn’t have any dividend support and doesn’t have a reasonable valuation relative to earnings – even assuming it has earnings – there’s no floor in this market. If you ask the question, how low can it go? The answer is almost always lower, “the”mad money“said the host.

“Never confuse a big dip with a dip. They are not synonymous,” he added.

Shares fell on Friday after the May Consumer Price Index showed higher than expected inflation figures.

Among the stocks that fell today were stitch correction and DocuSignwhich Cramer highlighted as two names illustrating his caution against investing in former high-flyers.

Shares of Stitch Fix, which have boomed during the pandemic as consumers have turned to online shopping, fell 18% on Friday, after the company announced layoffs on Thursday and said it will s ‘expects a decline in revenue in the fourth quarter.

The company hit a fresh 52-week low of $6.18 earlier in the day, down from its 52-week high of $64.52 hit about a year earlier.

DocuSign, another pandemic winner, saw its stock plummet 24% after missed Wall Street expectations on revenue and earnings for its most recent quarter.

The company also hit a new 52-week low earlier today at $64.30, well below its 52-week high of $314.76 hit last August.

“These newer stocks, the ones that were invented in the last three, four, five years, they were incredibly expensive before the peak…maybe even before they went public, so as their business grows deteriorates, they can drop very, very far before they find any kind of support,” Cramer said.

He added that despite DocuSign’s steep drop, he still doesn’t think the stock is cheap enough to be a buy. As for Stitch Fix, the stock is untouchable until the company’s core business stabilizes, he said.

“We don’t care where these old market darlings have been. … We only care where they go,” he added.

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