Buying undervalued stocks may provide substantial profits for investors, particularly if the underlying businesses are poised for a huge upswing. These three cheap stocks have a lot of potential and should rise significantly by 2025. Investors looking to optimize their returns must comprehend the basics of these organizations. The businesses’ strong foundations—such as their resilient e-commerce platforms, global expansion into digital commerce, and leadership in AI and cloud computing—highlight the industry’s significant development potential. Similarly, their strategy’s emphasis on client involvement and operational efficiency has increased transaction volumes and profitability. 

Finally, a robust content pipeline, strong box office results, and creative technology investments highlight growth potential and resilience. These are undervalued stocks, and finding and buying them may be profitable since the firms have solid fundamentals and may take advantage of opportunities down the road. By examining the growth drivers and strategic advantages of these businesses, it is possible to increase the value of a portfolio and generate significant returns.

Alibaba (BABA)

Alibaba (NYSE:BABA) leads the global e-commerce and cloud computing giant. Taobao and Tmall Group (TTG) are Alibaba’s two leading e-commerce platforms. They are the important foundations of its expansion strategy. These platforms have demonstrated strong performance with double-digit annual gross merchandise volume (GMV) growth in Q4 fiscal 2024. This indicates rising consumer spending and transaction volumes.

Additionally, Alibaba International Digital Commerce (AIDC) has considerably improved the company’s international income diversification. AIDC announced a noteworthy 45% rise in revenue, attributed to robust results in the retail and wholesale sectors. In particular, AliExpress has effectively extended its international retail activities, with a 20% annual rise in orders.

Moreover, Alibaba is another important development driver thanks to its expertise in cloud computing. Alibaba Cloud’s revenue increased by double digits in the previous year because of growing customer utilization of its AI-related products and public cloud services. Alibaba has become a pioneer in AI technology because of its superior infrastructure and strong relationships with top Chinese enterprises. This is seen in the triple-digit growth in revenue connected to AI.

Overall, Alibaba is on the undervalued stock list due to its solid performance in core e-commerce platforms and international digital commerce growth.

PayPal (PYPL)

PayPal (NASDAQ:PYPL) leads in online payment solutions. The company reached $3.5 billion in transaction margin dollars, a 4% increase, indicating greater operational efficiency. Higher interest rates on client balances, improved performance in branded checkout systems, and efficient cost-control strategies were the main drivers of this development. The company’s mark on sustainable expansion aligns with its focus on increasing profitability through smart pricing and operational savings.

Moreover, PayPal’s operational income increased by 15%. With that, its operating margin increased by 0.84% to 18.2%. This demonstrates the success of its efforts to minimize costs and increase margins. Further, PayPal attracted 2 million new active accounts consecutively, hitting 427 million total active accounts, despite a modest decline in total active accounts year over year. This expansion demonstrates PayPal’s capacity to draw in and hold onto a sizable client base worldwide. Additionally, there is a 13% rise in transactions per active account over the previous 12 months—to 60 transactions, demonstrating the company’s attempts to enhance client involvement.

In summary, PayPal’s focus on improving operational edge, transaction margin dollars, and customer engagement makes it the top pick among undervalued stocks.

Warner Bros. Discovery (WBD)

Warner Bros. Discovery (NASDAQ:WBD) is a leader in the media and entertainment industry. The studio’s division has had a solid performance, with Warner Bros. bringing in more than $1.8 billion from worldwide box office receipts since 2024’s start. Here, the studio was the first in 2024 to break the $1 billion mark in global and international box office receipts. The company plans to make the most of its robust content pipeline to maintain its momentum in theatrical releases. This includes highly anticipated blockbusters like “The Lord of the Rings.”

Additionally, the company may have a sequential increase in advertising income in Q2, mostly due to growth in direct-to-consumer (D2C) sales and significant sporting events. Warner Bros. Discovery has demonstrated endurance in global markets, with positive revenue growth in strategic areas, including Germany, Italy, and Poland. Initiatives like Ad-Lite solutions in Latin America and EMEA may even strengthen ad revenue tactics. The goal of investments in content discovery algorithms, enhanced ad targeting, and AI-powered consumer offers is to maximize ad-break chances in premium content.

To conclude, Warner Bros. Discovery is at the top of the undervalued stocks list because of its strong box office performance, technological investments, and advertising revenue.

As of this writing, Yiannis Zourmpanos held long positions in BABA, PYPL and WBD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.