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 are three S&P 500 stocks to avoid and some better alternatives instead.
Workday (WDAY)
Market Cap: $33.95 billion
Born from the vision of PeopleSoft founders after Oracle's hostile takeover of their previous company, Workday (NASDAQ: WDAY) provides cloud-based software for financial management, human resources, planning, and analytics to help organizations manage their business operations.
Why Are We Cautious About WDAY?
- Revenue increased by 14.1% annually over the last two years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 10.9% for the next 12 months implies demand will slow from its two-year trend
- Operating margin improvement of 5.9 percentage points over the last year demonstrates its ability to scale efficiently
Workday’s stock price of $136.23 implies a valuation ratio of 3.3x forward price-to-sales. Check out our free in-depth research report to learn more about why WDAY doesn’t pass our bar.
Palo Alto Networks (PANW)
Market Cap: $214.5 billion
Founded in 2005 by security visionary Nir Zuk who sought to reimagine firewall technology, Palo Alto Networks (NASDAQ: PANW) provides AI-powered cybersecurity platforms that protect organizations' networks, clouds, and endpoints from sophisticated threats.
Why Does PANW Give Us Pause?
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 72%
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 1.5 percentage points
Palo Alto Networks is trading at $257.51 per share, or 15.6x forward price-to-sales. Read our free research report to see why you should think twice about including PANW in your portfolio.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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.
