Why Discovery Could be the Next Big Name to Grab Reddit’s Attention

As the sell-offs continue, is it time to pounce?

Closing out last week’s trading action, we saw plenty more of the same for the tech industry, but as traders continued to kick stocks to the curb, it appears media companies are being left for dead now as well, setting up names like Discovery (DISCA) or Viacom (VIAC) to potentially become the next darling stocks of Reddit.

Last week, shares of Discovery stock fell 45%, while last week, while ViacomCBS shed over half of its value after both stocks became the subjects of large block trades, with trade volume 10x their averages on March 26.  But despite the fall, Discovery stock is still up 39% percent year-to-date, outperforming the S&P 500.

And according to consensus estimates compiled by CNN Business, Discovery has a median target price of $48, which is about 15% above current prices. Among the 26 analysts covering the stock, only four have a buy rating, while six have a sell rating or some equivalent. Meanwhile, 16 analysts recommend a hold. And last week, Wells Fargo downgraded the stock from “overweight” to “equal weight,” while UBS downgraded it from “neutral” to “sell.” In total, the downgrades added fuel to the fire and Discovery stock fell during the week.

This scenario should sound a bit familiar.

Here’s a hint. A post on Reddit group WallStreetBets, which was upvoted over 7,500 times, already noticed the dip in stocks like Discovery as a buying opportunity. Add the high short interest, and Discovery becomes a prime example of the kind of stocks that WallStreetBets are targeting. While some companies that the group targeted, like GameStop (GME) and >AMC (AMC), have weak fundamentals, this isn’t the case with Discovery.

The company’s core business has been doing well and generating healthy cash flows, something GameStop never showed in January, and the launch of its streaming service Discovery+ should play well in the current state of streaming content.

Originally published by MarketRealist.com

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