Celestica Stock Analysis: Riding the AI Wave with Impressive Growth

Are you looking for a hidden gem in the AI sector that has the potential for massive growth? Look no further than Celestica (NYSE:CLS) (TSE:CLS), a Canadian company that has seen its stock price soar by an incredible 365% over the past 12 months. With a market cap of $7 billion, Celestica is a prime example of how strategic shifts towards high-growth sectors can yield huge returns.

So, what exactly is Celestica and why is it attracting so much attention from investors? Celestica is a company that designs and manufactures electronics while providing supply chain solutions for various industries, including aerospace, defense, healthcare, and enterprise communications. The company’s end-to-end product lifecycle solutions have made it an invaluable partner for over 100 original equipment manufacturers, including industry giants like Dell and Cisco Systems.

One of the key drivers of Celestica’s growth has been its focus on the AI and machine learning (ML) sector. The company’s Connectivity and Cloud Solutions (CCS) segment, which supports telecom infrastructure, cloud services, and data centers, has been the main growth driver for Celestica. In fact, CCS represented 65% of the company’s revenue in the first quarter of this year, up from 57% a year ago.

Celestica’s hyperscaler customers, which refer to its operations in providing large-scale infrastructure solutions for massive data processing and storage, have also been central to the company’s growth. Hyperscaler revenue represented 62% of CCS revenue in the first quarter, and management expects this figure to continue growing throughout 2024.

Despite its impressive stock price performance, Celestica continues to trade at attractive valuation multiples. The stock is currently trading at 17.8x non-GAAP forward earnings, and this figure is expected to fall to 16.3x in 2025 and 13.3x in 2026. With a healthy balance sheet and a strong position serving the growing AI and ML segment, Celestica looks like a solid investment opportunity.

Analysts on TipRanks have given Celestica a Moderate Buy rating, with an average price target of $51.48, implying a 13.1% downside potential. However, with the company’s strong balance sheet, impressive tailwinds from its hyperscaler customers, and its capacity to leverage AI to improve its own business processes, I believe Celestica has plenty of room to grow.

In conclusion, if you’re looking for a stock with the potential for significant growth in the AI sector, Celestica is definitely worth considering. With its strong fundamentals and attractive valuation multiples, this lesser-known AI winner could be a hidden gem in the market.