Megacap stocks are behemoths that set the tone for their industries, and their massive scale typically leads to wide moats. However, the downside is that most have already exploited their existing market opportunities and must invest heavily to expand further, a risky proposition.
This dynamic can trouble even the most skilled investors, but luckily for you, we started StockStory to help you navigate these trade-offs and uncover exceptional companies that break the mold. Keeping that in mind, here is one industry titan whose competitive advantages creates flywheel effects and two whose momentum may slow.
Two Mega-Cap Stocks to Sell:
Tesla (TSLA)
Market Cap: $1.30 trillion
Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ:TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.
Why Should You Dump TSLA?
- Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
- The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
- On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.
At $393.83 per share, Tesla trades at 191.9x forward price-to-earnings. Check out our free in-depth research report to learn more about why TSLA doesn’t pass our bar.
Bank of America (BAC)
Market Cap: $376.5 billion
Tracing its roots back to 1784 and now serving approximately 67 million consumer and small business clients, Bank of America (NYSE:BAC) is a global financial institution that provides banking, investing, asset management, and risk management products and services to individuals, businesses, and governments.
Why Does BAC Fall Short?
- Scale is a double-edged sword because it limits the firm’s growth potential compared to its smaller competitors, as reflected in its below-average annual net interest income increases of 5.3% for the last five years
- Net interest margin of 2% reflects its high servicing and capital costs
- Performance over the past two years shows its incremental sales were less profitable, as its 1.4% annual earnings per share growth trailed its revenue gains
Bank of America’s stock price of $51.71 implies a valuation ratio of 1.3x forward P/B. Read our free research report to see why you should think twice about including BAC in your portfolio.
One Mega-Cap Stock to Watch:
Netflix (NFLX)
Market Cap: $442 billion
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Why Does NFLX Stand Out?
- Global Streaming Paid Memberships have grown by 14.1% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 29% exceeded its revenue gains over the last three years
- Free cash flow margin grew by 18.4 percentage points over the last few years, giving the company more chips to play with
Netflix is trading at $104.43 per share, or 2.8x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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