February was a clear winner for the broad market. When all was said and done the S&P 500 advanced to the tune of 5.2% last month. Not every name in the S&P 500 logged gains, however. A few of them suffered serious losses.
Veteran investors understand such setbacks can be buying opportunities. Just because a stock's been beaten down, however, doesn't inherently mean it's worth owning.
Here's a closer look at last month's biggest losers among the S&P 500's constituents, and some discussion about whether or not it's time to jump into any (or even all) of them.
The S&P 500's worst of the worst
The S&P 500's biggest February losers are Insulet (PODD 1.23%), Charter Communications (CHTR -1.73%), and Paramount Global (PARA -2.22%), down (respectively) 14.1%, 20.7%, and 24.5% for the month.
Most of Insulet's loss immediately followed the release of its fourth-quarter numbers. They were good. The top line improved 37% to nearly $510 million, topping expectations of $461 million. And adjusted operating earnings of $1.40 per share not only left the year-ago comparison of $0.52 in the dust, but it handily beat earnings estimates of $0.66 per share.
However, guidance from the insulin pump maker was lackluster. Expectations of revenue growth of between 12% and 17% for 2024 don't compare favorably to full-year consensus estimates of 16.6%. Worse, even at the high end of its revenue growth guidance for the quarter currently underway Insulet fell short of analysts' outlooks. Investors fear this weak guidance is a hint of the company's longer-term future.
Charter's big February stumble is also the result of a disappointing quarterly report.
As could have been expected, the cable giant lost more cable customers; this time around Charter lost another 257,000 paying subscribers. Investors were surprised, however, to learn the company also lost 61,000 broadband internet customers. "Internet growth in our existing footprint has been challenging, driven by admittedly more persistent competition from fixed wireless and similar levels of wireline overbuild activity," CEO Chris Winfrey said during the earnings conference call. High-speed internet was one of the few ways the cable industry has been offsetting its ever-shrinking pay-television user base.
Finally, Paramount shares steadily lost ground all month long as investors increasingly understand this media company's future doesn't look particularly bright.
Paramount is of course the owner of Paramount film and TV studios as well as streaming platform Paramount+. That's not the end of its entertainment presence though. It's also parent to television network CBS plus a handful of cable channels like MTV, CMT, Showtime, Comedy Central, and Nickelodeon. Free-to-watch streaming service PlutoTV is also a Paramount property, leveraging its large library of content. It's a respectable collection of entertainment brands and services.
Except, as a business these brands and services are struggling. The company's streaming services are still losing money with no end in sight, while its film business is rarely meaningfully profitable (if it's profitable at all). TV media is its one and only reliable breadwinner, yet even its revenue and operating profits are steadily deteriorating.
Dealmaking discussions have taken place, for the record. Warner Bros. Discovery was reportedly mulling a merger, for instance, while media mogul Byron Allen floated an offer of $30 billion for the entirety of Paramount. Meanwhile, Comcast is said to have been interested in combining the two companies' flagship streaming services.
But investors can't help but notice that none of this interest is actually resulting in deals or partnerships. Last quarter's numbers posted on Wednesday merely reminded investors that the company's top and bottom lines continue to shrink.
To buy, or not to buy?
So which -- if any -- of these three S&P 500 stocks are worth scooping up at a discounted price?
Merely asking the question merits making a much more important point first. That is, a steep sell-off alone isn't enough of a reason to jump into a stock, even when the underlying company in question is a well-known name. There's often more to the story to consider.
Take Insulet's setback as an example. Although revenue growth guidance wasn't as robust as expected, the company's still calling for double-digit growth ahead. Investors have just soured on the stock following the advent of newly approved weight loss drugs and diabetes treatments, which could curb demand for insulin pumps.
That's a (very) unproven hypothesis though. As BTIG analyst Marie Thibault wrote in a research note late last year, "Given the low, single-digit penetration of pumps in the T2D [type 2 diabetes] intensive insulin therapy population, the potential impact to the insulin pump [total addressable market] looks relatively minor to us."
In other words, Insulet's February stumble (not to mention the stock's halving since the middle of last year) is a buying opportunity.
That's not the case for Charter Communications shares. Although the cable company acknowledges its broadband business's slowdown is no small problem, it's powerless to do anything meaningful about it. Reports have surfaced that it's interested in acquiring rival Altice. But that would only result in a scale-up of both organizations' common problem.
As for Paramount, while it may be tempting now that it's prioritizing profitability -- and on the streaming front in particular -- saying it is easier than doing it.
See, streaming revenue is largely a function of the quality and quantity of the content made available within that streaming platform. A push for profitability could undermine the marketability of Paramount+. In the meantime, bear in mind that ongoing cord-cutting is slowly chipping away at Paramount's TV business's top and bottom lines, perhaps offsetting into cost-control efforts that are in the cards. Until it's clear these challenges can be successfully addressed, Paramount stock is a tough name to own as well.
Again though, the bigger takeaway for investors is that a single bad month for a stock is never a reason in and of itself to jump into a new position. There's always a bigger picture to consider.
