6 Hot Growth Stocks To Buy Right Now in 2024

In this article, we discuss the 6 hot growth stocks to buy now. If you want to read about some more growth stocks that are active in the market, go directly to the 6 Hot Growth Stocks To Buy Right Now.

As 2024 moves forward, the outlook for both the stock and bond markets undergoes regular fluctuations, influenced by various factors such as economic data releases, Federal Reserve communications, and changes in interest rate forecasts. As an example, the Federal Reserve hiked its benchmark interest rate 11 times from March 2022 to July 2023 amid resurgent inflation, reaching its highest level in more than two decades. This uptick in borrowing costs has contributed to alleviating inflationary pressures, with recent data showing consumer prices increasing by only 3.1% from January 2023, marking a decline from the peak of 9.1% in June 2022 and edging closer to the Fed's 2% target.

Surprisingly, progress against inflation has been notable without inflicting significant economic hardship, with unemployment remaining below 4% for 24 consecutive months. Moreover, employers have consistently added an average of 244,000 jobs per month over the past year, with December and January seeing over 300,000 new jobs each. This combination of subdued inflation and GDP growth has fostered optimism that perhaps the Fed can achieve a rare "soft landing."

On the other hand, the current year has an array of growth opportunities spanning different sectors within the capital markets. Leading the forefront is the technology sector, with artificial intelligence (AI) spearheading innovation. Its swift advancements and widespread integration across various industries render it an appealing option for investors pursuing growth and transformative prospects. As an illustration to this point, venture capital investments in generative AI and AI-related startups surged to nearly $50 billion the past year alone, with notable startups such as OpenAI, Anthropic, and Inflection commanding substantial portions of these investments.

Following suit is the healthcare sector, securing the second spot, as it progresses alongside developments in medical technologies and a growing emphasis on personalized medicine. The increasing demand for GLP-1, a medication class utilized in managing type 2 diabetes (T2D), is a key factor driving this trend. According to research by J.P. Morgan, the GLP-1 category is projected to surpass $100 billion by 2030, with growth attributed equally to its use in treating both diabetes and obesity.

When it comes to stock selection for substantial returns in such times, focusing on growth stocks is a popular strategy. Growth stocks are characterized by higher share prices relative to their earnings per share, reflecting expectations of significant future growth. One metric commonly used to identify growth stocks is the price-to-earnings ratio (P/E ratio). This ratio compares the current share price to the earnings per share, indicating the premium that the market is willing to pay for a stock's earnings potential.

Some of the notable companies included in our list of hot growth stocks to buy are Salesforce, Inc. (NYSE:CRM) and Advanced Micro Devices, Inc. (NASDAQ:AMD), as well as industry giants like NVIDIA Corporation (NASDAQ:NVDA) and Uber Technologies, Inc. (NYSE:UBER), among others listed below.

6 Hot Growth Stocks To Buy Right Now

A close-up of a stock market ticker displaying the company's stocks.

Our Methodology

In this piece, we utilized stock screeners to identify stocks meeting specific criteria as of March 28. Our selection criteria included stocks with an average 3-month volume surpassing 3 million and a P/E ratio exceeding 50. Additionally, we incorporated a quarterly revenue growth rate of over 10% as another parameter for our list. Lastly, we provided insights into the number of hedge funds invested in each stock, shedding light on growth stocks favored by hedge funds.

Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years . That’s why we pay very close attention to this often-ignored indicator.

Hot Growth Stocks To Buy Right Now in 2024——1. Palantir Technologies Inc. (NYSE:PLTR)

• P/E Ratio: 254.82
• Avg Volume: 70.81 million
• rterly Revenue Growth: 19.61%
• Number of Hedge Fund Holders: 44

Palantir Technologies Inc. (NYSE:PLTR) operates as a software company specializing in data fusion platforms, facilitating both machine-assisted and human-driven data analysis. Its product platform includes Palantir Gotham, Palantir Apollo, and Palantir Foundry.

Following encouraging financial results in the fourth quarter, Palantir Technologies Inc. (NYSE:PLTR) witnessed a 19% surge in its stock. Revenue increased by 20% to $608 million, driven by robust demand for its Artificial Intelligence Platform (AIP) among commercial customers, although growth in the government segment remained subdued. Additionally, GAAP net income tripled to $93 million as Palantir focused on cost control measures.

According to Insider Monkey's analysis of 933 hedge fund portfolios for the December quarter of 2023, 44 had stakes in Palantir Technologies Inc. (NYSE:PLTR). D. E. Shaw emerged as the largest investor, owning 20.75 million shares valued at $356.39 million.

Much like Salesforce, Inc. (NYSE:CRM), Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA) and Uber Technologies, Inc. (NYSE:UBER), Palantir Technologies Inc. (NYSE:PLTR) is one of the best trending growth stocks.

Hot Growth Stocks To Buy Right Now in 2024——2. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

• P/E Ratio: 883.17
• Avg Volume: 3.94 million
• Quarterly Revenue Growth: 32.63%
• Number of Hedge Fund Holders: 62

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a cybersecurity technology company headquartered in Austin, Texas, USA. Specializing in cloud workload and endpoint security, threat intelligence, and cyberattack response services, it plays a crucial role in safeguarding digital assets.

On March 14, analysts at Cantor Fitzgerald maintained an Overweight rating and set a price target of $400 for CrowdStrike Holdings, Inc. (NASDAQ:CRWD).

In the fourth quarter of 2023, 62 out of the 933 hedge funds tracked by Insider Monkey had investments in CrowdStrike Holdings, Inc. (NASDAQ:CRWD). The largest hedge fund investor in the company is Jim Simons’s Renaissance Technologies, with holdings valued at $450 million.

TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its fourth quarter 2023 investor letter:

    “Across the Information Technology universe, we seek companies possessing differentiated capabilities, products, and services. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides cloud-delivered protection across endpoints and cloud workloads. Their stock rallied 53% on the heels of solid fiscal third quarter results, with net new annualized recurring revenues accelerating sequentially.”

Hot Growth Stocks To Buy Right Now in 2024——3. Shopify Inc. (NYSE:SHOP)

• P/E Ratio: 857.44
• Avg Volume: 9.86 million
• Quarterly Revenue Growth: 23.58%
• Number of Hedge Fund Holders: 68

Shopify Inc. (NYSE:SHOP) stands as a premier provider of internet infrastructure for commerce, offering a suite of tools that empower businesses to establish, expand, market, and oversee retail operations across various scales. Serving millions of businesses in 175 countries, Shopify Inc. (NYSE:SHOP) plays a pivotal role in bolstering a diverse array of enterprises.

As of December 2023, Insider Monkey's analysis of 933 hedge fund portfolios revealed that 68 of them held shares of Shopify Inc. (NYSE:SHOP). Notably, the largest shareholder among them was Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke, and John Campbell, with shares valued at $1.6 billion.

Artisan Mid Cap Fund stated the following regarding Shopify Inc. (NYSE:SHOP) in its fourth quarter 2023 investor letter:

    “Among our top contributors were Chipotle, DexCom and Shopify Inc. (NYSE:SHOP). We got a chance to initiate a position in Shopify during the 2022 growth stock selloff, with the view that this is a leading e-commerce franchise that will continue to benefit from key secular tailwinds. Like many market participants, we were concerned about the company’s capital-intensive fulfillment investments in the face of a slowing e-commerce market and welcomed the news that it decided to exit the logistics business in favor of a capital-light partnership model. This change in strategy significantly narrows the downside range of outcomes, and allows us to focus on what it does so well: develop great e-commerce software solutions for brands of all sizes. We have been encouraged by Shopify’s subsequent pace of innovative new product enhancements, which include the use of AI assistants to help brands run their businesses.”

Hot Growth Stocks To Buy Right Now in 2024——4. Block Inc (NYSE:SQ)

• P/E Ratio: 14582.76
• Avg Volume: 10.80 million
• Quarterly Revenue Growth: 24.13%
• Number of Hedge Fund Holders: 75

Block Inc. (NYSE:SQ), originally named Square Inc., is an American public company founded in 2009 by Jack Dorsey and Jim McKelvey. It operates across various sectors within the financial technology industry. With nearly 4 million merchants and 51 million users as of 2023, Block's service network has experienced substantial growth.

The surge in Block Inc. (NYSE:SQ) shares followed the release of its Q4 results and strong 2024 EBITDA guidance. In the fourth quarter, Block Inc. (NYSE:SQ) reported a net income of 2 cents per share, a significant improvement compared to the loss of 93 cents per share in the year-ago period.

In the fourth quarter of 2023, 75 out of the 933 hedge funds tracked by Insider Monkey held stakes in Block Inc. (NYSE:SQ), marking a notable increase from 60 hedge funds in the previous quarter.

Hot Growth Stocks To Buy Right Now in 2024——5. Merck & Co., Inc. (NYSE:MRK)

• P/E Ratio: 998.11
• Avg Volume: 8.69 million
• Quarterly Revenue Growth: 13.82%
• Number of Hedge Fund Holders: 98

Merck & Co., Inc. (NYSE:MRK), a renowned American multinational pharmaceutical company headquartered in Rahway, New Jersey, has a rich history dating back to the Merck Group, founded in Germany in 1668. As the American arm of this esteemed group, the company operates as Merck Sharp & Dohme or MSD outside the United States and Canada, maintaining a leading position in the pharmaceutical industry. Its focus areas include the development of medicines, vaccines, biologic therapies, and animal health products.

With a track record of consistent dividend growth spanning 11 consecutive years, Merck & Co., Inc. (NYSE:MRK) currently offers a quarterly dividend of $0.77 per share, translating to a dividend yield of 2.33% as of March 28.

In the fourth quarter of 2023, 98 out of the 933 hedge funds tracked by Insider Monkey held shares of Merck & Co., Inc. (NYSE:MRK). Among them, Ken Fisher’s Fisher Asset Management emerged as the company’s largest investor, with holdings valued at $1.4 billion.

Hot Growth Stocks To Buy Right Now in 2024——6. Eli Lilly and Company (NYSE:LLY)

• P/E Ratio: 136.85
• Avg Volume: 3.20 million
• Quarterly Revenue Growth: 28.10%
• Number of Hedge Fund Holders: 102

Founded in 1876, Eli Lilly and Company (NYSE:LLY) is a renowned American pharmaceutical company based in Indianapolis, Indiana. Named after its founder, Colonel Eli Lilly, a pharmaceutical chemist and Civil War veteran, the company has a global presence, operating in 18 other countries.

Eli Lilly and Company (NYSE:LLY) currently pays out a quarterly dividend of $1.30 per share and has demonstrated consistent dividend growth over the past decade. Furthermore, the company has a notable track record of uninterrupted dividend payments to its shareholders for 138 years. As of March 16, the stock offers a dividend yield of 0.69%.

As of the end of December 2023, 102 out of the 933 hedge funds profiled by Insider Monkey had purchased and held shares of the company. Among these, Ken Fisher’s Fisher Asset Management held the largest stake in Eli Lilly and Company (NYSE:LLY), valued at $2.6 billion.

Similar to Salesforce, Inc. (NYSE:CRM), Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA) and Uber Technologies, Inc. (NYSE:UBER), Eli Lilly and Company (NYSE:LLY) is a hot growth stock to invest in.

6 Surprising Stocks to Buy Now in 2024

 We typically suggest that the best stocks to buy are undervalued shares of companies with fundamental advantages that should allow them to effectively compete for decades.

Economic moats can strengthen or weaken over time as individual companies and sometimes entire industries evolve; as a result, we’ll upgrade or downgrade a company’s economic moat rating. But a moat rating change on a company isn’t a buy or sell rating for its stock. The stocks of companies that have undergone moat rating changes can still be overvalued or undervalued, depending on where their stocks are trading relative to our fair value estimates.

Recently downgraded the economic moat ratings on six companies whose stocks look undervalued today. We’d consider these stocks to buy at current prices. Do we think these are six high-quality companies? Nope. Should these six stocks be core holdings in an investment portfolio? Probably not. Are these six stocks cheap? Absolutely. In fact, we think these six surprising stocks are attractive investment opportunities specifically for risk-tolerant investors with long time horizons.

6 Surprising Stocks to Buy Now in 2024

Recently downgraded the economic moat ratings of these companies, yet their stocks look undervalued—and attractive when adjusted for uncertainty—as of April 15, 2024.

1.       AMC Networks AMCX

2.       Compass Minerals International CMP

3.       Fox FOX

4.       Nordstrom JWN

5.       Paramount Global PARA

6.       Warner Bros. Discovery WBD

Here’s a little bit about each stock from the analyst who covers the company, along with some key  metrics. All data is as of April 15, 2024.

6 Surprising Stocks to Buy Now in 2024 — AMC Networks

• Rating for Stocks: 4 stars
• Economic Moat Rating: None
• Uncertainty Rating: Very High
• Stock Style Box: Small Value
• Industry: Entertainment

AMC Networks stock looks cheap, trading 32% below our $15 fair value estimate. We recently downgraded this small company’s economic moat rating to none from narrow: We don’t think AMC nor its peers who have relied heavily on traditional pay TV can be nearly as profitable in a media industry built on streaming, explains  senior analyst Matthew Dolgin. And as our Very High Uncertainty Rating suggests, the disruption of the traditional pay-TV industry combined with the company’s relatively small size make predicting future cash flows tough. That said, we expect the decline in traditional TV to stabilize and for results at AMC Networks to improve greatly. We think the stock has been overly punished, adds Dolgin: It was among the worst-performing stocks of first-quarter 2024.

AMC Networks is deploying an “all of the above” strategy, and we think that gives the firm its best chance in a difficult environment. AMC is a small player that we expect will be challenged to independently find its place with consumers who are overwhelmed with numerous different streaming services, most of which have broader and deeper content than what AMC can provide. It also must continue to find and create attractive programming, which should be increasingly difficult in an industry that now has more and much larger competitors.

“All of the above” means that AMC is open to monetizing its content in multiple ways, some of which would be much riskier for peers. AMC continues to find its place in the traditional pay-TV bundle, but it generates proportionately less of its revenue on that bundle than many peers. Affiliate revenue from pay-TV distributors made up one third of the firm’s US revenue in 2023, and we estimate AMC received only about $1 per subscriber per month, on average. AMC sells its streaming services—most notably AMC+—to retail subscribers and bundles it at wholesale prices with other services. Streaming subscription revenue was nearly as much as affiliate revenue in 2023. AMC has also placed content on other streaming platforms, receiving licensing revenue or a share of associated revenue from the other streaming platforms, and it has created content to sell to third parties.

We think holding on to the linear affiliate revenue stream is critical for AMC, but we believe the relatively minuscule amount of revenue that AMC receives per pay-TV subscriber is an opportunity to make itself even more valuable. As affiliate agreements come up for renewal over the next few years, AMC is open to including AMC+ for pay-TV subscribers. Given the low amount the pay-TV distributors are paying AMC, we believe they would find this offer attractive. Even if AMC couldn’t extract additional fees from the distributors, much higher distribution for its streaming services would open new advertising opportunities.

6 Surprising Stocks to Buy Now in 2024 — Compass Minerals International

•  Rating for Stocks: 4 stars
•  Economic Moat Rating: Narrow
•  Uncertainty Rating: Very High
• Stock Style Box: Small Growth
• Industry: Other Industrials Metals & Mining

Compass Minerals was also among the worst-performing stocks of first-quarter 2024. We downgraded our economic moat rating on this small company to narrow from wide in April: While we still believe Compass’ salt business possesses a wide economic moat, we think the company’s other activities—its plant nutrition business and its failed investments in lithium and wildfire retardants—will weigh on its future returns on invested capital, explains  strategist Seth Goldstein. Still, we think Compass Minerals stock looks cheap, trading 45% below our fair value estimate of $25.

Compass Minerals has an enviable portfolio of cost-advantaged assets. Its Goderich rock salt mine in Ontario benefits from unique geology, and with access to a deep-water port, it can deliver deicing salt to customers at a lower cost than competitors. Additionally, the company controls one of only three naturally occurring brine sources that produces the specialty fertilizer sulfate of potash, or SOP. These operations at the Great Salt Lake in Utah can produce SOP at a lower cost than marginal-cost producers that convert standard potash.

The majority of Compass’ salt sales are to highway deicing customers. Sales volumes are determined during the winter months and strongly linked to the number of snow days per season. As such, weather has a big impact on Compass’ year-to-year results. The deicing salt business also exposes Compass to climate change risk. One effect of climate change is increased snowfall volatility from year to year, which affects Compass’ annual results. However, winter weather has shown mean reversion tendencies over longer periods.

Pricing for deicing salt is linked to winter weather as well. However, prices have historically been relatively stable compared with other commodities. Deicing salt has a low value/weight ratio, creating regional markets, and transportation costs make up a significant portion of total costs to the customer. With mines close to waterways like the Great Lakes and the Mississippi River, Compass has a transportation cost advantage over its competitors.

Compass also produces SOP, which is used for high-value crops that are sensitive to the chloride in standard potash (muriate of potash). While marginal producers use MOP and sulfuric acid to produce SOP, Compass makes most of its SOP directly from salt brine at a lower cost. 

6 Surprising Stocks to Buy Now in 2024 — Fox

•  Rating for Stocks: 4 stars
•  Economic Moat Rating: None
•  Uncertainty Rating: High
• Stock Style Box: Mid Value
• Industry: Entertainment

We think Fox has better near-term prospects than its stock price suggests, says ’s Dolgin, thanks to its major sports rights (including the National Football League for most of the next decade) and the top cable news network. Like AMC Networks, though, Fox is facing a new media industry in which it’s less likely to be nearly as profitable—and, as a result, we’ve downgraded our economic moat rating on the mid-cap company to none from narrow. Fox stock is a bargain: Shares are trading 35% below our $43 fair value estimate.

Fox’s strategy differs from its biggest traditional media peers, and its business has been far more resilient as a result. Although it has outperformed in the past few years, we think its dependence on the traditional pay-TV bundle for nearly all its revenue is problematic over the long term.

The two major areas where Fox differs from peers are: 1) its departure from entertainment production and, to a large extent, entertainment programming to focus on live news and sports; and 2) its decision not to operate a large-scale subscription-based streaming service.

Consumers are much more likely to watch sporting events and news programs in real time, and Fox has been able to grow advertising revenue while peers have floundered as linear viewership declines and television advertising dollars have waned. Also, the premier sports content to which Fox holds rights and Fox News’ popularity with cable viewers has given Fox bargaining power with pay-TV distributors. Despite ongoing cord-cutting, Fox’s revenue from pay-TV subscribers has continued to grow, as Fox has negotiated higher affiliate fees. Fox receives more than $8 per domestic pay-TV subscriber per month from pay-TV providers and affiliated local networks. 

Problems for Fox will arise if pay-TV subscribers perpetually decline and the pay-TV bundle eventually crumbles. We assume Fox will license all its programming to streamers, but we doubt this avenue will make up for its current affiliate revenue. As long as its streaming partners have fewer subscribers than the current number of pay-TV subscribers, Fox would have to extract higher fees per subscriber than it does now from pay-TV customers, a tall order for streaming services that have other significant content costs to contend with. We expect a similar challenge with the streaming sports joint venture that Fox is creating with Warner Bros. Discovery and Disney, and a preemptive move toward streaming licensing risks accelerating the demise of the traditional bundle. Ultimately, we believe the pay-TV bundle is best for consumers and companies like Fox, but unless that bundle can be repurposed for the streaming age, we expect Fox will face long-term challenges.

6 Surprising Stocks to Buy Now in 2024 — Nordstrom

•  Rating for Stocks: 5 stars
•  Economic Moat Rating: None
•  Uncertainty Rating: Very High
• Stock Style Box: Small Value
• Industry: Department Stores

We recently downgraded the economic moat rating on this small company to none from narrow. Although Nordstrom operates the largest US high-end department store by sales and lays claim to one of the larger off-price concepts in the market (Nordstrom Rack), market forces have worked against the company’s results, and we don’t expect that trend to reverse course, explains  senior analyst David Swartz. We think significant spending will be required to generate even modest sales growth, he adds. Although uncertainty around the future of the business is very high, Nordstrom stock looks like a bargain as it trades 54% below our $38.50 fair value estimate.

Nordstrom has a loyal customer base built on differentiated fashion products, quality brands, and first-rate service. While we used to think that these strengths provided a competitive advantage based on a brand intangible asset, we no longer believe that it does. Realistically, Nordstrom’s recovery from the pandemic has been rocky, and the US apparel retail market has only become more competitive.

Nordstrom has 93 full-price stores, nearly all of them in desirable Class A malls (sales per square foot above $500) or major urban centers. While this store base may provide an advantage over department stores in lower-tier malls, the productivity of Nordstrom’s full-price stores has been declining all the same. The firm has invested heavily in e-commerce (36% of 2023 sales) to adapt, but digital sales seem to have come at the expense of store sales.

Nordstrom also has a presence in discount retail with Rack (about 260 stores) that could make up for some of the full-price weakness. Indeed, 19 Rack stores opened in 2023, and another 22 or so openings are expected in 2024. Rack, however, has underperformed peer discount stores of late, suggesting that it does not provide a competitive edge to Nordstrom.

Nordstrom unveiled a new strategic plan, Closer to You, in early 2021 that emphasizes e-commerce, growth in key cities (through local and other initiatives), and a broader off-price offering. Among the merchandising changes, Nordstrom intends to increase its private-label sales (to 20% of sales from about 10% now) and greatly expand the number of items offered through partnerships (to 30% from about 5% now). The firm set medium-term targets of annual revenue of $16 billion-$18 billion, operating margins above 6%, annual operating cash flow of more than $1 billion, and returns on invested capital in the low teens. Nordstrom’s recent struggles to manage through industry turmoil and exit from Canada have put these goals in doubt, but we forecast it will return to low teens adjusted ROICs (including goodwill) by 2026. However, we anticipate operating margins will top out at just over 6% in the long run due to intense competition.

6 Surprising Stocks to Buy Now in 2024 — Paramount Global

•  Rating for Stocks: 4 stars
•  Economic Moat Rating: None
•  Uncertainty Rating: Very High
• Stock Style Box: Small Value
• Industry: Entertainment

Paramount Global is a cheap stock to buy, trading 45% below our fair value estimate of $20. We downgraded this small company’s economic moat rating to none from narrow; it’s another name facing very high uncertainty as streaming services take hold in the entertainment industry. We believe the firm’s Paramount+ service is benefiting from the addition of live programming, integration with Showtime, and an openness to bundling, including with Walmart+, says ’s Dolgin.

Like peers, Paramount has been in a period of transition and facing significant uncertainty about how and whether the traditional linear television business will coexist or evolve in a media environment dominated by streaming services. Based on its current state, we think the company has the right strategy for streaming and advantages related to distribution and content ownership that will enable it to successfully manage the industry’s evolution.

Management has seemingly realized that there are too many streaming services with good content for consumers to be regular subscribers to all. It has therefore blurred the line between linear and streaming and moved to focus on one platform for all its best content, consolidating Showtime and Paramount+ and including local CBS programming to potentially improve customer stickiness. Sporting events on local CBS stations, including football and March Madness tournament games, are included with Paramount+. The firm discontinued the Showtime linear network, so the previous linear Showtime subscribers now have access to Paramount+. The firm is also open to partnerships and bundles, whether paired with other subscription services like Walmart+ or with pay-TV distributors. We think this will result in the widest possible exposure—and therefore monetization—of Paramount’s attractive content.

Throughout the company’s financial struggles amid the industry transition over the past few years, there has been no diminution in quality or popularity of the firm’s content. CBS continues to garner the largest audiences of all television networks and holds NFL and March Madness rights into the 2030s. Paramount Pictures and CBS Studios remain among the most prolific creators of film and television programming. We expect content creation will continue to drive licensing revenue, and the content that Paramount keeps for its own distribution outlets will remain valuable for consumers as the firm becomes agnostic to whether they’re receiving access through traditional television or streaming services. Still, we expect a more subdued business that won’t be able to increase profits nearly as much as in the past.

6 Surprising Stocks to Buy Now in 2024 — Warner Bros. Discovery

•  Rating for Stocks: 5 stars
•  Economic Moat Rating: None
•  Uncertainty Rating: Very High
• Stock Style Box: Mid Value
• Industry: Entertainment

The final name on our list of surprising stocks to buy, Warner Bros. Discovery is trading a remarkable 58% below our $20 fair value estimate. In fact, the stock is among our analysts’ favorite 33 undervalued stocks for second-quarter 2024. As with other media names, we downgraded Warner’s economic moat rating to none from narrow, given the uncertainty surrounding the industry shift to streaming and new competition. ’s Dolgin expects Warner to survive, in part because of its topnotch production studios that create popular films and episodic television content.

Warner Bros. Discovery faces significant uncertainty surrounding its evolution in a media landscape defined by cord-cutting and many streaming choices. Ultimately, we think Warner’s scale, distribution channels, production studios, and content portfolio will make it one of the survivors.

Like several peers whose businesses were built for traditional linear television, Warner has faced financial pressure as it tries to figure out how to compete in a world where consumers have preferred streaming to traditional television. Warner’s networks business has declined amid a continually shrinking pay-TV subscriber base, while at the same time the firm faced heightened costs to build a streaming platform, attract subscribers, and populate its platforms with a robust content library. We expect these previously bifurcated segments to start working in harmony.

Warner’s streaming business is now profitable and more mature, and we think the firm has the right strategy to navigate a convergence between traditional and new media. Its streaming assets are now confined exclusively to Max and Discovery+. Max is the home for nearly all Warner Bros. on-demand entertainment content, but it has also become an outlet for live news and sports. CNN Max, which features live programming and includes some high-profile linear CNN simulcasts, is now included in all Max subscriptions. The sports add-on package includes NBA, MLB, NHL, and NCAA March Madness games to which TNT and TBS have rights. 

Whether through streaming, linear, or licensing, we expect first-rate Warner content to continue to reach consumers. The firm’s production studios remain top-tier in terms of highest-grossing films each year and popular episodic television content. Warner may have to fine-tune the traditional balance and timing for things like film exclusivity in theaters versus availability at home, or which television shows and films to license versus keeping in-house. But having a menu of distribution options and attractive content behind it should be deciding factors behind the firm’s future success. Still, we expect a more subdued business that won’t be able to grow profits nearly as much as in the past.

What Is an Economic Moat?

The companies with economic moats have significant advantages that allow them to successfully fend off competitors for a decade or longer. Companies can carve out their economic moats in a variety of different ways—by having high switching costs, through strong brand identities, or by possessing economies of scale, to name just a few.