Valued at a market cap of $48 billion, Celestica (TSX:CLS) is among the many largest tech firms in Canada. Within the final three years, CLS inventory has returned greater than 2,200% to shareholders, pushed by the synthetic intelligence-powered bull run.
Whereas CLS inventory has delivered game-changing returns for traders since 2023, let’s see if it could preserve its momentum over the following three years.
The bull case for investing in Celestica inventory
Celestica supplies electronics manufacturing and provide chain options for expertise firms worldwide.
The Toronto-based agency designs, builds, and assembles {hardware} parts, providing providers from product growth by way of after-market help.
It serves cloud suppliers, aerospace, defence, healthcare, and communications sectors by way of two segments: Superior Expertise Options and Connectivity and Cloud Options.
Celestica has elevated its income from US$5.6 billion in 2021 to US$9.7 billion in 2024, indicating an annual development fee of virtually 20%.
Q3 Outcomes
Celestica delivered file third-quarter outcomes and raised its full-year outlook as surging demand for AI information centre gear drives distinctive development.
- The Toronto-based electronics producer posted income of US$3.2 billion, up 28% from final yr and above steering. Adjusted earnings per share rose 52% to US$1.58.
- The corporate now expects 2025 income of US$12.2 billion, up from a earlier forecast of US$11.6 billion, representing 26% annual development.
- Administration raised its earnings outlook to US$5.90 per share from US$5.50, implying 52% development for the yr.
- Working margins reached 7.6%, the very best quarterly degree in firm historical past.
CEO Rob Mionis stated Celestica is navigating probably the most speedy interval of change in its historical past, pushed by huge AI infrastructure investments from hyperscale prospects.
Its high-performance networking swap enterprise, which incorporates merchandise for firms corresponding to Microsoft and Metais anticipated to generate roughly US$5 billion in income this yr, an 80% improve. Income from hyperscalers now accounts for 44% of the corporate’s whole gross sales.
Outlook
Trying forward:
- Celestica supplied a preliminary 2026 income outlook of US$16 billion, indicating 31% development.
- The corporate expects earnings of US$8.20 per share, a 39% improve.
- Administration expressed confidence extending into 2027 primarily based on visibility into a number of new program ramps, together with next-generation networking switches and customized AI compute platforms.
Celestica is making vital capability investments to help development. Celestica is increasing its Richardson, Texas, facility to help manufacturing of 1000’s of extra AI racks yearly and finalizing plans for one more giant manufacturing web site within the state. The agency can also be including capability at its Thailand campus to accommodate manufacturing ramps deliberate by way of 2027 and 2028.
CFO Mandeep Chawla stated capital expenditures will rise to between 2% and a couple of.5% of income subsequent yr from 1.5% at the moment, all funded by operational money movement.
The corporate holds a robust market share in high-bandwidth Ethernet switching, accounting for 55% of spending on customized AI networking options. Celestica has gained 10 packages for next-generation 1.6 terabit switches, with preliminary manufacturing ramps anticipated in late 2026.
Is CLS inventory nonetheless undervalued?
Celestica is forecast to extend income from US$9.7 billion in 2024 to US$25.7 billion in 2028. On this interval, adjusted earnings are forecast to develop from US$3.88 per share to US$14.14 per share.
If CLS inventory is priced at 30 occasions ahead earningsit’s going to commerce round US$424 in early 2029, indicating an upside potential of 40% from present ranges.