Is Celestica (TSX:CLS) Still Undervalued On AI Data Center Demand And Analyst Upgrades?

Recent coverage around Celestica (TSX:CLS) has focused on its role supplying AI data center hardware and networking gear, along with earnings estimate revisions that have pushed the stock into the spotlight for many investors.

Celestica’s share price has surged in recent months, with a 30-day share price return of 24.96% and a year-to-date share price gain of 25.20%. The 1-year total shareholder return of 51.61% points to strong momentum building around the AI data center story and shifting expectations about the company’s risk and growth profile.

Capitalize on Celestica’s AI data center momentum by scanning a curated group of 88 AI infrastructure stocks that are also plugged into hyperscaler and cloud infrastructure spending.

Celestica’s share price has sprinted ahead of most models, while analyst fair value estimates still point to a sizeable gap. Is that discount a genuine margin of safety, or a mirage created by fast-moving expectations?

Most Popular Narrative: 23% Undervalued

On current estimates, the most widely followed narrative puts Celestica’s fair value at about CA$677 per share versus the last close of CA$519.22. That gap sets the stage for a debate about how much of the AI and data center story is already reflected in the price.

Accelerated demand for advanced networking and AI infrastructure by hyperscaler customers is driving rapid growth in Celestica's CCS segment, with multiple new 800G and upcoming 1.6T program ramps, supporting robust revenue expansion and greater operating leverage over the next 12 to 24 months.

See why 169 investors see Celestica as 23% undervalued.

Based on this framework, analysts apply a discount rate of 7.89% to future cash flows and land on a fair value estimate of roughly CA$677. That implies Celestica trades at about a 23% discount to this narrative fair value.

Result: Fair Value of CA$677 (UNDERVALUED)

Still, the bullish Celestica story runs into real friction if hyperscaler customers pull back on AI infrastructure budgets or if key 800G and 1.6T program ramps encounter difficulties.

Find out about the key risks to this Celestica narrative.

Next Steps

Strong enthusiasm around Celestica’s AI exposure cuts both ways, so treat this as a prompt to move quickly, review the numbers yourself, and weigh the 1 or more risks against the 1 or more rewards highlighted in the 4 key rewards and 1 important warning sign.

Looking for more Celestica-like investment ideas?

If Celestica has your attention, do not stop here. Broaden your opportunity set and pressure test your thesis against other potential candidates using the Simply Wall St Screener.

• Target stocks that mix quality with valuation support by scanning a curated group of 6 high quality undervalued stocks before the crowd catches on.
• Strengthen your portfolio’s foundation by reviewing the list of solid balance sheet and fundamentals (7 results) so you are not relying on fragile balance sheets when conditions turn.
• Hunt for under-the-radar potential by running through the 9 high quality undiscovered gems and avoid missing businesses that have yet to hit the headlines.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com