The extraordinary performance of Nvidia (NASDAQ:NVDA) in 2023 coincided with a seismic generative-AI rally that carried the entirety of the S&P 500 higher in a year that was punctuated by Fed interest rate hikes and geopolitical uncertainty.
Now, with the expectations of rate cuts finally arriving in the second half of 2024, we can look to more stocks posting similar levels of impressive growth backed by a more positive market outlook.
We were already handed a taste of what Wall Street would look like as headwinds cleared and interest rates fell. The expectation of Federal Reserve rate cuts were enough to see the S&P 500 break the 5,000 points mark for the first time in its history back in February. However, March’s consumer price index (CPI) inflation data weighed in higher than expected, pushing back forecasts for the Fed’s reversion into a dovish monetary stance.
Despite stubborn inflation data, the Fed still predicts three quarter-point cuts by the end of 2024, indicating that the second half of the year will bring more bullish sentiment to Wall Street.
This will be crucial in empowering more stocks to emulate the success of Nvidia in 2023. Without the generative-AI hype cycle as a tailwind, the key to growth in the second half of the year will be down to optimism for recovering markets and the strong fundamentals of firms.
With this in mind, let’s explore three stocks that are well-positioned to rival Nvidia’s growth rates in the second half of 2024:
Warner Bros Discovery (WBD)
There’s no getting away from the challenging start to the year that Warner Bros Discovery (NASDAQ:WBD) has experienced. With a decline of more than 35% over the first five months of 2024, WBD is now perched around 67.5% below its 2022 debut price on Wall Street.
Compounded by Q1 2024 results that fell below expectations, Warner Bros Discovery has struggled to generate momentum this year. With a Q1 loss per share of 40 cents compared to 24 cents expected and revenue of $9.96 billion that fell below forecasts of $10.231 billion, it’s understandable to see the stock sink lower in recent months.
However, the recent announcement that Warner Bros Discovery is set to form a partnership with Disney in a bid to rival Netflix could be a watershed moment for the stock.
Despite its weaker Q1 2024 earnings report, WBD also announced impressive quarterly profits of $86 million for its direct-to-consumer (DTC) unit, which focuses heavily on streaming and pay-per-view TV services. This figure far exceeds the $50 million posted over the same period in 2023 and clearly signifies the value of streaming services for the company.
The streaming collaboration, which features the combination of major services like Disney+, Hulu and Max, will be focused on rivaling the likes of Netflix and Amazon Prime.
Given that WBD’s market capitalization is just a fraction of both Netflix and Amazon, and just 10% of the size of Disney, the successful rollout of its new-look streaming service could make the stock appear extremely undervalued, and a strong option for investors as confidence returns to Wall Street.
Biogen (BIIB)
Another stock that appears extremely undervalued is Biogen (NASDAQ:BIIB). The post-pandemic landscape has seen investor sentiment flow in and out of BIIB in a way that’s generated extreme volatility for the stock.
Despite experiencing growth of more than 80% between October 2019 and June 2021 as the COVID-19 pandemic and subsequent race for a vaccine dominated markets, the stock now sits at a value that’s lower than at any point in the year prior to the pandemic in 2019.
So why does Biogen hold so much potential in the second half of 2024? Its fundamentals are simply too good to justify such a low price today.
The biotech’s bottom line from its first quarter earnings saw Biogen’s non-GAAP (generally accepted accounting principles) adjusted net income grow by 8% to $535 million, or $3.67 per share.
This positive news was buoyed by two products smashing sales expectations in the quarter. Firstly, the Alzheimer’s drug Leqembi, which was developed with Eisai, almost doubled its $11 million revenue projections by generating $19 million in sales. While Skyclarys also beat sales expectations, achieving $78 million in sales–some $9 million ahead of forecasts in Q1 2024.
As a result, Morningstar analysts have suggested that Biogen is undervalued by around 28%. With the tailwinds of a clearing market and higher product sales expectations as the winter months draw nearer, the second half of the year could make a strong springboard for growth.
United Airlines (UAL)
Unlike the other stocks mentioned here that offer opportunity because recent performance has caused them to become undervalued, we can look to United Airlines (NASDAQ:UAL) as an example of a stock that’s shown enough resiliency in a turbulent industry to suggest that it has much further still to run.
UAL has rallied more than 30% at the time of writing, and this comes at a time of industry uncertainty and a historically high cost of living in the U.S. that could impact the volume of customers the airline receives in 2024.
Recently, concerns have been raised over the firm’s exposure to Boeing, a plane manufacturer that’s come under fire for fears over vulnerabilities in its 737 MAX airplanes. However, while Boeing stock has fallen significantly over the course of the year, UAL has remained buoyant on Wall Street.
By posting growth despite major headwinds impacting the company, United Airlines has shown that it’s more than capable of sustaining its rally as wider market conditions recover. As the cost of living subsides and customers have more freedom to travel domestically and internationally, we could see UAL well-positioned to take full advantage of the holiday season later in 2024.
On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
