Celestica (TSX:CLS) Rides AI Demand, Is It Still A Bargain?

AI demand puts Celestica in the spotlight

Recent commentary around Celestica (TSX:CLS) centers on its role supplying AI focused data center and cloud hardware, as hyperscaler customers ramp up infrastructure projects and contribute to momentum in the Connectivity and Cloud Solutions segment.

The near term has been choppy for Celestica, with a 7 day share price return that declined 6.33%, yet the 30 day share price return of 7.61% and year to date gain of 24.62% suggest momentum is still broadly positive.

Over a longer stretch, the 1 year total shareholder return of 51.28% and a 3 year gain of more than 13x coincide with growing attention on Celestica’s AI related contracts. Recent commentary on earnings potential and customer concentration helps frame how much risk investors are willing to price into a CA$516.79 share price.

Scan beyond Celestica and spot other potential beneficiaries of the same AI infrastructure build out with the hand picked 92 AI infrastructure stocks in this space.

Bulls see Celestica as an AI infrastructure pure play priced for years of contracts, while bears worry a 3 year return of more than 13x already captures that. Which story fits the current CA$516.79 tag?

Most Popular Narrative: 26% Undervalued

Set against a narrative fair value of CA$694.93 and a last close of CA$516.79, the current Celestica share price reflects a wide gap that hinges on how durable hyperscaler AI spending and margin trends prove to be.

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 171 investors see Celestica as 26% undervalued.

Result: Fair Value of CA$694.93 (UNDERVALUED)

Still, the Celestica story can break if a few big hyperscaler clients pull back on orders, or if major AI hardware ramps hit delays and squeeze margins.

Find out about the key risks to this Celestica narrative.

Next Steps

Mixed messages around Celestica’s AI story can feel noisy, so review both sides of the data quickly and decide where you land. To see the full breakdown of risks investors flag and rewards they are watching, start with the 4 key rewards and 1 important warning sign.

Looking for more Celestica sized ideas?

If Celestica has you rethinking what is possible with AI infrastructure, broaden your watchlist and let data driven filters surface fresh possibilities fast.

• Target resilience first and search for companies that pass tough balance sheet and fundamentals checks with the list of solid balance sheet and fundamentals (7 results).
• Hunt for potential mispricings by filtering for companies that look high quality yet potentially underappreciated through the 8 high quality undervalued stocks.
• Build a cash flow focused watchlist by scanning for robust yields using the 3 dividend fortresses.

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