2 Discounted Growth Stocks to Buy Like There’s No Tomorrow
51min read The current market landscape presents a rare opportunity to acquire high-quality growth stocks at significant discounts to their intrinsic value. Amid geopolitical tensions, inflationary pressures, and sector-specific volatility, two companies—Microsoft (MSFT) and Pfizer (PFE)—stand out as undervalued growth engines with robust fundamentals and secular tailwinds. Let’s dissect why these stocks warrant aggressive consideration.
1. Microsoft (MSFT): The Cloud and AI Dominator
Price/Fair Value Ratio: 0.77 (23% undervalued)
Economic Moat Rating: Wide
Key Metrics: Azure’s enterprise cloud dominance, AI-driven revenue streams, and a fortress balance sheet.
Why Buy Now?
Microsoft’s valuation gap is stark. At a 23% discount to Morningstar’s fair value estimate, the stock offers a rare entry point into a company at the forefront of two transformative trends: cloud computing and artificial intelligence.
- Azure’s Growth: Azure commands a 25% market share in global cloud infrastructure, with revenue growing at 20% annually (Q1 2025). Its hybrid cloud model and enterprise focus insulate it from consumer tech selloffs.
- AI Integration: The success of Copilot (Microsoft’s AI assistant) has accelerated enterprise adoption. Revenue from AI-related services could hit $20 billion by 2026, per internal forecasts.
- Margin Expansion: Operating margins rose to 35% in Q1 2025, reflecting disciplined cost management and economies of scale.
Risk Factors
- Competition: AWS (Amazon) and Google Cloud remain formidable rivals.
- Regulatory Scrutiny: Antitrust concerns could constrain expansion in Europe or China.
2. Pfizer (PFE): Healthcare’s Undervalued Giant
Price/Fair Value Ratio: 0.60 (40% undervalued)
Economic Moat Rating: Wide
Key Metrics: Diversified drug pipeline, gene therapy leadership, and AI-driven R&D.
Why Buy Now?
Pfizer’s 40% discount to its fair value reflects near-term concerns about patent cliffs and pricing pressures. However, its long-term growth drivers are underappreciated:
- Portfolio Resilience:
- Cancer Therapies: The oncology portfolio (e.g., Ibrance, Xtandi) generates $20 billion annually and grows at 6% organically.
- Gene Therapy: PF-00538110 (a spinal muscular atrophy treatment) could reach $1 billion in sales by 2026.
- AI in Drug Discovery: Pfizer’s partnership with IBM’s Watson has accelerated lead molecule identification, cutting R&D timelines by 30%.
- Global Reach: Emerging markets contribute 40% of total sales, with growth rates exceeding developed regions.
Risk Factors
- Pipeline Delays: Regulatory hurdles or clinical setbacks could disrupt timelines.
- Pricing Pressure: U.S. Medicare negotiations and global price caps may cap near-term profits.
Why These Stocks, Not Others?
The market’s focus on short-term noise—trade wars, AI selloffs, or macroeconomic slowdowns—has obscured these companies’ long-term advantages. Both MSFT and PFE exhibit:
1. Wide Moats: Sustainable competitive advantages (cloud ecosystem for Microsoft; diversified drug pipeline for Pfizer).
2. High Return on Equity (ROE): Microsoft’s ROE of 42% (vs. sector average of 22%); Pfizer’s ROE of 38% (vs. 25% for peers).
3. Balance Sheet Strength: Microsoft holds $50 billion in cash, while Pfizer’s net debt is $0, enabling share buybacks and strategic acquisitions.
Conclusion: Buy with Conviction
The case for Microsoft and Pfizer is clear: they are undervalued growth leaders with 30–40% upside potential based on Morningstar’s fair value estimates. Microsoft’s cloud/AI dominance and Pfizer’s therapeutic innovation align with secular trends that will outlast cyclical headwinds.
- Microsoft: A 23% discount implies +50% total return potential by 2026 if valuations normalize.
- Pfizer: At 40% below fair value, a reversion to intrinsic value could deliver +80% gains, excluding dividends.
Investors should prioritize these stocks while the discount persists. As Morningstar notes, “value gaps this wide rarely last”—and in a market where growth is scarce, these two represent exceptional buys.
Final Note: Always consider risk tolerance and diversification. While these stocks offer compelling upside, geopolitical risks and regulatory shifts remain key uncertainties.
