On Monday, Stifel adjusted its price target for Celestica (TSX:CLS) (NYSE: NYSE:CLS) shares, increasing it to $51.00 from the previous $48.00, while reaffirming a Hold rating on the stock.
The revision follows a series of investor meetings last week with Celestica's CFO, Mandeep Chawla, which centered around the company's burgeoning hyperscale-cloud segment.
Celestica's hyperscale-cloud business, representing approximately 40% of its total revenue in the first quarter, experienced a year-over-year growth of over 38%. This surge was attributed to the expansion of AI-server ramps.
The discussions with investors also covered the competitive landscape, Celestica's competitive advantages in servers and networking, and prospects for the 400G and 800G switch cycle.
The company's Advanced Technology Solutions business is anticipated to return to growth in the second half of 2024. Stifel's analysts have expressed admiration for Celestica's transformation in recent years and its strong positioning in data-center computing and broader industrial markets.
Despite the positive outlook, Celestica's stock is noted to have undergone a significant re-rating, currently trading at a price-to-earnings (P/E) ratio above most of its peers.
Stifel's new price target of $51.00 is based on 14 times the firm's fiscal year 2025 earnings per share estimate of $3.65. The Hold rating suggests that Stifel advises investors to maintain their current position without buying more shares or selling existing holdings at this time.
InvestingPro Insights
Recent data from InvestingPro shows that Celestica (NYSE: CLS) is a company with several notable financial metrics. With a market capitalization of $5.76 billion and a P/E ratio currently standing at 17.98, the company appears to be trading at a reasonable valuation considering its near-term earnings growth. Its adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly higher at 18.31, which may reflect investor confidence in its profitability prospects, as analysts predict the company will be profitable this year. The company's revenue growth has been robust, with a 10.79% increase over the last twelve months as of Q1 2024, and an even more impressive quarterly revenue growth rate of 20.19% in Q1 2024.
One of the "InvestingPro Tips" highlights that Celestica has been aggressively buying back shares, a move that can signal management's confidence in the company's future and often results in an increase in earnings per share. Additionally, the company's stock has experienced a high return over the last year, with a 344.64% price total return, indicating strong market performance. Despite some concerns over weak gross profit margins, which stand at 10.12%, the company's strong returns and growth dynamics may continue to attract investor interest.
For readers looking for more in-depth analysis, there are additional "InvestingPro Tips" available on Celestica, which can be found at https://www.investing.com/pro/CLS. These tips can provide further guidance on the company's financial health and market position. To gain access to these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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