The S&P 500 (^GSPC) is often seen as a benchmark for strong businesses, but that doesn’t mean every stock is worth owning. Some companies face significant challenges, whether it’s stagnating growth, heavy debt, or disruptive new competitors.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. That said, here is one S&P 500 stock that is positioned to outperform and two that could be in trouble.
Market Cap: $10.88 billion
Known for its memorable Super Bowl commercials that put it on the map, GoDaddy (NYSE:GDDY) is a domain registrar and web services provider that helps entrepreneurs establish an online presence through domain registration, website building, hosting, and e-commerce tools.
Why Should You Sell GDDY?
-
Average billings growth of 5.5% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
-
Estimated sales growth of 5.7% for the next 12 months implies demand will slow from its two-year trend
-
Gross margin of 63.6% is below its competitors, leaving less money to invest in areas like marketing and R&D
GoDaddy is trading at $81.43 per share, or 2.1x forward price-to-sales. Read our free research report to see why you should think twice about including GDDY in your portfolio, it’s free.
Market Cap: $334.6 billion
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE:CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Does CAT Give Us Pause?
-
Flat sales over the last two years suggest it must find different ways to grow during this cycle
-
High input costs result in an inferior gross margin of 29.2% that must be offset through higher volumes
-
Earnings per share have dipped by 5.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
At $718.22 per share, Caterpillar trades at 31.3x forward P/E. To fully understand why you should be careful with CAT, check out our full research report (it’s free).
Market Cap: $34.21 billion
Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE:HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.
Why Are We Positive On HPE?
-
Offerings are pivotal for their customers’ operations as its ARR has averaged 47.2% growth over the past two years
-
Massive revenue base of $35.74 billion makes it a well-known name that influences purchasing decisions
-
Market share is on track to rise over the next 12 months as its 16.8% projected revenue growth implies demand will accelerate from its two-year trend