CNBC’s Jim Cramer warned investors on Friday that shares of some newer companies that were a resounding success during the pandemic continue to fall, and that may be just the beginning.
“When your stocks have no dividend support and are not reasonably valued compared to earnings, assuming they even make a profit, there is no ground in this market. If you are wondering, how low can it go? The answer is almost always lower, “said Mad Money’s host.
“Never confuse a big drop with a bottom. They are not synonymous,” he added.
Shares fell on Friday after the May consumer price index showed higher-than-expected inflation figures.
Stocks that have fallen today include Stitch Fix and DocuSign, which Cramer highlighted as two names that illustrate his warning against investing in old-fashioned flyers.
Shares of Stitch Fix, which saw a boom during the pandemic as consumers shifted to online shopping, fell 18% on Friday, after the company announced layoffs on Thursday and said it expects revenue decreased in the fourth quarter.
The company hit a new 52-week low of $ 6.18 earlier in the day, below its 52-week high of $ 64.52 a year earlier.
DocuSign, another pandemic winner, saw its stock plummet 24% after losing Wall Street expectations of revenue and earnings in its last quarter.
The firm also hit a new 52-week low of $ 64.30, well below its 52-week high of $ 314.76 last August.
“These newer stocks, the ones that were minted in the last three, four, five years, have been incredibly expensive before the peak … maybe even before they go public, so as your business it deteriorates, they can fall far, far away before they find any support, “Cramer said.
He added that despite the sharp drop in DocuSign, he still doesn’t think the stock is cheap enough to be a purchase. As for Stitch Fix, the shares are untouchable until the company’s core business stabilizes, he said.
“We don’t care where these old market lovers have been … We only care where they go,” he added.
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