We've Got Updated Wall Street Price Targets for Three Holdings

We are making our way through the earnings conference calls on Tuesday morning for Builders FirstSource BLDR, TopBuild BLD, NXP Semiconductor NXPI and GlobalFoundries GFS, but wanted to share our reaction to ISM’s October Services PMI report and a few Wall Street moves that explain some of the strength in our holdings.

October Services PMI Tops Consensus Expectations

While last week’s October Manufacturing PMI for ISM showed that part of the economy continues to soften, Tuesday's October Services PMI, which topped market expectations, shows that part of the economy remains vibrant. The headline figure of 56 bested the 54.9 market consensus and September’s 53.8 figure but the added context is the October print was the highest in the last 12 months. While the new order components softened some compared to September, the October reading of 57.4 continued the recent streak of expanding activity and was the second-highest figure in the last year. Taken together, it’s fair to say the overall economy is poised to grow above trend for October and most likely November.

Turning to the Service Price component, this trended lower in October, hitting 58.1, a level that was still higher than those for June, July and August. Paired with the jump in the Prices component from ISM’s October Manufacturing PMI, it’s reason enough to think inflation is stickier than many expected.

Following up on today’s Daily Video comments about the October Employment Report, ISM found robust job growth in the service sector during October. Not only did the October print of 53 reverse the falling trend of the last few months, but it was also the highest level in the last 12 months. This pushes back considerably on the bad data found in the October Employment Report.

A growing Services economy with an improving labor market are all positives for GDP expectations and consumer spending prospects. Factor in the inflation data found in the report and it suggests that while the Fed is likely to deliver a rate cut later this week and should other October inflation data show inflation to be sticky, questions about another cut in December are likely to emerge. As we explained in today’s video, we fully expect Fed Chair Powell will be sticking to the Fed playbook with data-dependent and meeting-by-meeting comments later this week.

Updated Wall Street Views on Select Portfolio Holdings

Bernstein initiated coverage of Eaton ETN with a $382 price target and an Outperform rating, joining us in thinking about electricity as a secular growth market. Following the retrenchment in ETN shares after last week’s earnings, we picked up additional shares after upping our target to $380.

Loop Capital raised its Meta Platforms META price target to $655 per share from $575 and kept its Buy rating. This seems to be a delayed reaction to last week’s beat and raise quarter that brought us an opportunity to pick up more META shares during the post-earnings sell-off.

Ahead of quarterly results out later this week, JPMorgan raised its price target on Axon AXON to $485 from $377 and maintained its Overweight rating. Some of that move is part catch-up, but while the firm notes the premium valuation attached to the shares, it expects Axon to deliver. As we discussed on Monday, we fully expect to revisit our AXON price target once the company reports, but the degree of that revisions will hinge on the expected mix shift toward cloud and what that means for margins and EPS.

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At the time of publication, TheStreet Pro Portfolio was long BLDR, ETN, META and AXON.