The Nasdaq Composite index fell 33% throughout 2022, with hardly any consumer-reliant companies left unscathed. Entertainment businesses like Warner Bros. Discovery (WBD -2.86%) experienced some of the sell-off's worst declines, with the company's stock plunging 62% last year.

However, bullish investors have grown optimistic about Warner Bros. Discovery since the start of 2023, with the company's stock up 56% since Jan. 1. The rally has come after the company announced its costly restructuring moves are mostly complete, with this year focused on growth, and a massive hit in video games.

The market is showing signs of recovery, and so is this entertainment giant's stock. A bull market is coming, so here are three reasons to buy Warner Bros. Discovery's stock. 

1. Warner Bros. Discovery has a diversified business model

With solid positions in streaming, at the box office, video games, advertising, and theme parks, Warner Bros. Discovery is one of the most varied entertainment companies. Over the long term, this diversification should reduce the volatility of its stock and fortify its business.

In 2022, many companies participating in the streaming market suffered steep stock declines alongside subscriber counts fluctuations. For instance, Netflix's revenue heavily relies on streaming subscriptions, with not many other sources of income. As a result, the company's stock experiences drastic peaks and valleys on a quarterly basis. Netflix shares soared 22% between Jan. 1 and Feb. 6 as the company announced an addition of over 7 million new streaming subscribers in the fourth quarter of 2022. Yet, its stock has declined 14% since then, with questionable financials outweighing increased memberships.  

Warner Bros. Discovery still has a long way to go, but its multiple revenue streams will likely pay off over the long term.

2. Lucrative improvements to its content strategy

Before the merger of WarnerMedia and Discovery last April, Warner Bros.'s content seemed to be taking hit after hit. HBO offerings continued to please, but at the box office, valuable franchises like DC and Harry Potter were losing consumer interest after a string of lackluster films.

However, Warner Bros. Discovery seems to be turning it around with a focus on quality. Last year, the major drivers of the company's stock decline were massive slashes to content and canceled projects, which had investors questioning management. The controversial moves allowed WBD to pare down its production costs and focus on its biggest earners, brands like Game of Thrones, DC, Harry Potter, and The Lord of the Rings. And this past February proved the company's content shifts have put it on a promising path.

On Feb. 10, Warner Bros. Discovery launched the console and PC video game Hogwarts Legacy. The new title has been a massive success for the company, earning $850 million and selling over 12 million units in its first two weeks. Hogwarts Legacy also led to a 300% increase in online traffic with Wizarding World Digital, the online home for all things Harry Potter. The achievement will likely lead to a boost in revenue from theme parks and past films, with future related projects attracting substantial audiences.

The game's success has proven that a quality piece of media can undo years of less profitable projects and reinvigorate a franchise. Warner Bros. Discovery similarly plans to relaunch franchises such as DC and The Lord of the Rings, which could enjoy similar financial success with the same treatment. 

3. Warner Bros. Discovery stock is a bargain buy

Despite Warner Bros. Discovery's significant stock rise since Jan. 1, its shares remain down 39% year over year. As a result, its price-to-earnings ratio of 6.5 is vastly lower than Netflix's 54.5 and Disney's 31. According to those figures, Warner Bros. Discovery is one of the best-valued entertainment stocks available.

Additionally, the company's 12-month price target of $21.80 is 42% higher than its current price, making Warner Bros. Discovery's stock a screaming buy alongside its long-term outlook.