Celestica (CLS) Stock Forecast & Price Target

Celestica Inc. is experiencing significant growth in its Connectivity & Cloud Solutions segment, which generates the majority of the company's revenue, indicated by a remarkable 66% year-over-year increase in its hyperscaler business, reaching $4.8 billion in FY24 and comprising 50% of total revenue. The positive momentum in strategically important end markets, particularly with HPS revenue from networking switches seeing a 67% year-over-year increase, further supports the company's promising outlook. Additionally, the anticipated rise in the mix of high-performance computing and original design manufacturing revenue is expected to elevate Celestica's valuation multiples, with an estimated 22% increase in earnings per share projected over the next twelve months, outpacing both EMS and ODM peers.

Celestica Inc. has reported a decline in the Advanced Technology Solutions (ATS) segment margin, decreasing by 20 basis points sequentially to 4.6%, attributed to lower operating leverage, which raises concerns about the company's profitability moving forward. Additionally, for fiscal year 2025, the company has revised its ATS revenue expectations to flat year-over-year growth, down from a prior outlook of low single-digit growth, and expects a significant 21% year-over-year decline in Connectivity & Cloud Solutions (CCS) Enterprise revenue due to challenges from transitions in AI and machine learning programs. Furthermore, a projected slowdown in revenue growth is indicated, with first quarter guidance suggesting moderate growth at a 15% mid-point, compared to the 19% year-over-year growth seen in the fourth quarter of fiscal year 2024, reflecting a wider trend of declining performance.