Hot Inflation, Bank Earnings and the SpaceX Move: 4 Stocks Still Undervalued

September inflation caught the market off guard: annual CPI printed 3.7% against 3.6% expected, with core at 2.6%. According to CNBC, the 10-year Treasury yield spiked intraday before settling at 5.19%, while the dollar hit an 18-month high. The rotation out of growth accelerated into value and energy. Futures repriced the odds of a month-end rate hike from 22% to 43% in a single day.

Morningstar's October outlook puts the US market at a 10% discount to fair value, but the number misleads: the entire discount sits in seven giants. Strip out Nvidia, Alphabet, Broadcom, Microsoft, Meta, Amazon and Tesla and the rest of the index trades at fair value. Buying the index and picking cheap stocks stock by stock are no longer the same game; the gap has never been wider.

The prescription is a barbell: a modest overweight in growth and value, funded by an underweight in core blend stocks. The checklist is crisp: wide economic moat, pricing power, near-term cash generation and a rising dividend. The slogan is simple: own the AI leaders, avoid distant-dated profitless growth stories and borrowers loaded with floating-rate debt.

Earnings week is packed: SpaceX and Netflix report on October 20, Tesla, Meta and IBM on October 21. Tesla delivered 486,532 vehicles in the third quarter versus 461,974 expected, a 5% beat that still trails last year by 2%. Zacks flags automotive margins and pricing pressure as the real test. FactSet expects Tesla EPS of $0.45 on $27.9 billion of revenue and Meta EPS of $6.67.

Big banks were mixed: JPMorgan posted a rare miss at $5.57 versus $5.93 expected, while Goldman crushed it at $17.01 against $13.02 as equities trading revenue surged 72%. Citi delivered its best third-quarter revenue in a decade and Wells Fargo says the consumer is holding up. At AboutSchwab the records kept coming: $190.4 billion in core net new assets and $7.2 billion of revenue. The shared warning from bank chiefs is the sheer scale of credit flowing into AI infrastructure.

At ASML the machine keeps humming: third-quarter sales of 11.7 billion euros, a 57.5% gross margin and 5 billion euros of net income. The company guides 2026 to 44-45 billion euros and the fourth quarter to 14.2-15.2 billion. Per CNBC, some customers are already discussing orders for 2029 and 2030 delivery, and 2028 capacity may rise beyond the planned 30% increase.

The week's sharpest move came in telecom: SpaceX announced a nationwide 800 MHz portfolio of up to 14 megahertz of paired spectrum from Grain, subject to FCC approval. Elon Musk called it a very big deal. Per CNBC, AT&T fell 9.8%, Verizon 8.8% and T-Mobile 13.3% the next session. Starlink counts more than 11,000 satellites across 205 countries; the company targets a mobile launch in late 2027.

Morningstar analyst Hodel stays calm: fair value estimates for the big three carriers stand, but Uncertainty ratings move from Medium to High. These licenses cover only about 6% of US low-band spectrum; Verizon's depth exceeds triple that in most areas. A real network needs fresh licenses in every band plus thousands of sites. The base case is unchanged: Starlink does not threaten the trio's wireless business, though it could push spectrum prices higher.

The episode closes with four long-term buys still trading cheap; names aside, the lesson is identical: wide moat, light debt, rising dividend. Broadcom tops Morningstar's most-undervalued wide-moat large-cap list. Defensive pockets such as health care, short-duration earners and businesses that can pass inflation through to prices stand out. This is a stock-picker's market: weigh the stock, not the basket.