3 Mega-Cap Stocks with Mounting Challenges
"Too big to fail" is how we would describe the megacap stocks in this article today. While they will likely stand the test of time, it's not all sunshine and rainbows as their scale can limit their ability to find new sources of growth.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you find high-quality companies that can grow their earnings no matter what. That said, here are three industry titans whose existing offerings may be tapped out and some other investments you should look into instead.
Market Cap: $2.18 trillion
Founded by Jeff Bezos after quitting his stock-picking job at D.E. Shaw, Amazon (NASDAQ:AMZN) is the world's largest online retailer and provider of cloud computing services.
Why Does AMZN Worry Us?
Amazon revolutionized the way consumers shop. But its capital-intensive online retail business caps its profitability, leading to margins that lag behind its Magnificent 7 peers.
Although Amazon Web Services is a gold mine producing mission-critical infrastructure, its outsized scale limits its growth rate compared to smaller peers such as Microsoft Azure and Google Cloud Platform.
Returns on invested capital are well below their pre-COVID peak as the company is in the middle of an investment cycle. Will Amazon ever harvest profits or keep pushing them to the future?
At $206.37 per share, Amazon trades at 32.3x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than AMZN.
Market Cap: $203.9 billion
Founded by brothers Walt and Roy, Disney (NYSE:DIS) is a multinational entertainment conglomerate, renowned for its theme parks, movies, television networks, and merchandise.
Why Should You Sell DIS?
Sizable revenue base leads to growth challenges as its 3.7% annual revenue increases over the last five years fell short of other consumer discretionary companies
Projected 5.3 percentage point decline in its free cash flow margin next year reflects the company's plans to increase its investments to defend its market position
Low returns on capital reflect management's struggle to allocate funds effectively
Disney is trading at $112.63 per share, or 20.4x forward P/E. Read our free research report to see why you should think twice about including DIS in your portfolio, it's free.
Market Cap: $253.1 billion
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ:CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Are We Cautious About CSCO?
Sales stagnated over the last two years and signal the need for new growth strategies
5.7 percentage point decline in its free cash flow margin over the last five years reflects the company's increased investments to defend its market position
Diminishing returns on capital suggest its earlier profit pools are drying up
Cisco's stock price of $63.90 implies a valuation ratio of 16.4x forward P/E. To fully understand why you should be careful with CSCO, check out our full research report (it's free).
Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
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From lottery tickets to life insurance: Here are 6 ‘bad assets' that could cause you to retire poor in America
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The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy. Prediction: This Hot Artificial Intelligence (AI) Semiconductor Stock Will Skyrocket After June 25 was originally published by The Motley Fool
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Prediction: These 2 Stocks Could Beat the Market in the Next Decade
Roku leads the connected TV market, benefits from a network effect, and still has significant growth avenues. MercadoLibre should win in the long run as e-commerce and fintech continue to gain widespread adoption. 10 stocks we like better than Roku › Those concerned about recent market volatility can take comfort in the fact that equity markets will likely deliver competitive returns over the next decade. Selling shares of top companies now may result in lower stock market gains than investors might have otherwise earned over the long term if they had held on. The better strategy is to stick to your holdings and be on the lookout for companies that can perform well, perhaps even better, than the market given enough time. Two stocks that might have what it takes are Roku (NASDAQ: ROKU) and MercadoLibre (NASDAQ: MELI). Here's more on these potential market beaters. Although Roku started 2025 strong, its shares have been in free fall for the past few weeks, partly due to somewhat disappointing financial results and guidance. Potential tariff-related headwinds are also not helping. Despite these concerns, the company's financial results remain strong, and its ecosystem continues to grow and strengthen. In the first quarter, Roku's revenue increased by 16% year over year to $1 billion. Streaming hours were 35.8 billion, 5.1 billion more than in the comparable period of the previous fiscal year. As more people spend more time on Roku's platform, the company's ecosystem becomes more valuable to advertisers, a classic example of the network effect. During the first period, Roku's platform revenue, which includes ad-related sales, increased by 17% year over year, compared to 11% year-over-year growth for its device segment, where it reports sales of its namesake streaming devices. Roku remains unprofitable, but it also made some progress on this front in the quarter, reporting a net loss per share of $0.19, which is better than the $0.35 reported in Q1 2024. Roku could feel some volatility in the near term, and the impact of tariffs remains somewhat uncertain. However, Roku has sold its devices at a loss before when faced with the choice. The company prioritizes deepening engagement within its ecosystem -- that's where the long-term opportunity lies. So, if tariffs lead to higher manufacturing costs for its devices, Roku will likely adopt the same strategy as before. Meanwhile, television viewing time is expected to continue shifting away from cable and toward streaming in the long run. And whichever giant in the industry wins the race makes little difference to Roku, which grants its users access to most of the big players in the streaming market. Advertising dollars will follow viewers wherever they go, providing Roku with plenty of revenue growth opportunities. Lastly, Roku's shares look reasonably valued. The company's forward price-to-sales ratio is just 2.3. The official undervalued range starts at 2, but the leader in the connected TV market in North America, even ahead of some tech giants, is worth the slight premium, in my view. Though the stock has dipped in the past few weeks, investors focused on the long game should seriously consider picking up the company's shares and holding on to them for the next decade. MercadoLibre is the undisputed leader in e-commerce in Latin America. The company has successfully fended off competition from local players and international powerhouses, including Amazon. But MercadoLibre isn't just an e-commerce platform -- it provides a comprehensive suite of services to merchants. The company's fintech platform also looks promising. MercadoLibre's dominance in these markets is leading to strong performances and financial results. The stock has increased by 48% this year. In the first quarter, the company's net revenue increased by 37% year over year to $5.9 billion. MercadoLibre's net income came in at $494 million, up 43.6% compared to the year-ago period. Other important metrics trended up, including gross merchandise volume, fintech monthly active users, and more. Those are the kinds of performances investors are used to with MercadoLibre. It arguably justified its forward price-to-earnings (P/E) ratio of 52.2, nearly twice the 27.9 average for the consumer discretionary sector. Here's the flip side: If MercadoLibre fails to perform in line with market expectations, its shares will drop significantly. Furthermore, although it does business in Latin America and won't suffer directly from the impact of tariffs, general economic instability that could result from President Donald Trump's trade policies would still have an impact on the stock. These are all legitimate concerns, but long-term investors should still consider buying the stock. There is massive whitespace in the e-commerce market in Latin America. Nobody is better positioned to benefit from it. MercadoLibre's revenue and profits should grow rapidly in the next 10 years. Even if the stock experiences a correction due to its valuation, in the long run, it should still outperform the market, just as it has in the past, despite some volatility and steep valuation metrics. MercadoLibre remains a strong candidate to outperform the market through 2035. Before you buy stock in Roku, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Roku wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $868,615!* Now, it's worth noting Stock Advisor's total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Amazon and MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Roku. The Motley Fool has a disclosure policy. Prediction: These 2 Stocks Could Beat the Market in the Next Decade was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
