While CLS stock has delivered game-changing returns for investors since 2023, let’s see if it can maintain its momentum over the next three years.
The bull case for investing in Celestica stock
Celestica provides electronics manufacturing and supply chain solutions for technology companies around the world.
The Toronto-based company designs, builds and assembles hardware components and offers services from product development to aftermarket support.
It serves cloud providers, aerospace, defense, healthcare and communications industries through two segments: advanced technology solutions and connectivity and cloud solutions.
Celestica has increased its revenue from $5.6 billion in 2021 to $9.7 billion in 2024, indicating annual growth of almost 20%.
Results Q3
Celestica delivered record third-quarter results and raised full-year guidance as rising demand for AI data center equipment drives exceptional growth.
- The Toronto-based electronics manufacturer posted revenues of $3.2 billion, up 28% from last year and ahead of expectations. Adjusted earnings per share rose 52% to US$1.58.
- The company now expects revenue of $12.2 billion by 2025, up from a previous forecast of $11.6 billion, representing annual growth of 26%.
- Management raised earnings guidance from $5.50 to $5.90 per share, implying 52% growth for the year.
- Operating margins reached 7.6%, the highest quarterly level in company history.
CEO Rob Mionis said Celestica is experiencing the fastest period of change in its history, driven by massive AI infrastructure investments from hyperscale customers.
The high-end network switching company, which includes products for companies such as Microsoft And Metais expected to generate approximately $5 billion in revenue this year, an increase of 80%. Hyperscaler revenue now accounts for 44% of the company’s total revenue.
Outlook
Looking ahead:
- Celestica gave a preliminary 2026 revenue guidance of $16 billion, indicating growth of 31%.
- The company expects earnings of $8.20 per share, an increase of 39%.
- Management expressed confidence extending into 2027, based on insights into multiple new program ramps, including next-generation network switches and custom AI computing platforms.
Celestica is making significant capacity investments to support growth. Celestica is expanding its factory in Richardson, Texas to support the production of thousands of additional AI racks per year and is finalizing plans for a new major manufacturing site in the state. The company is also adding capacity at its Thailand campus to accommodate planned production platforms through 2027 and 2028.
CFO Mandeep Chawla said capital expenditure will rise from 1.5% to 2% to 2.5% of sales next year, all funded by operating cash flow.
The company has a strong market share in high-bandwidth Ethernet switching and accounts for 55% of spending on custom AI networking solutions. Celestica has won ten programs for next-generation 1.6 terabit switches, with the first production ramps expected in late 2026.
Is CLS stock still undervalued?
Celestica is expected to increase revenue from $9.7 billion in 2024 to $25.7 billion in 2028. During this period, adjusted earnings are expected to rise from $3.88 per share to $14.14 per share.
If CLS stock is worth 30 times forward earnings, it will be worth about $424 in early 2029, indicating 40% upside potential from current levels.
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