Celestica Jumps 125% in a Year After AI Demand Boost

Celestica Inc. shares have climbed 125% over the past 12 months, bringing the company’s market value to about $40 billion. The Toronto-based electronics manufacturer reported first-quarter revenue of $4.05 billion, a 53% increase from the prior year that the company attributes to demand for AI-related hardware.

Celestica, which trades in the U.S. as CLS, designs and builds server components, networking equipment and power systems. Its customers include Amazon, Google, Meta Platforms, Dell Technologies and HPE. U.S. data-center counts are about 4,497 locations, concentrated in Virginia, Texas and California.

Quarterly revenue fell within the company’s guidance range of $3.85 billion to $4.1 billion. Gross margin rose to 10.8% from negative 0.5% a year earlier. Revenue was divided between Connectivity and Cloud Solutions (CCS) at $3.24 billion and Advanced Technology Solutions (ATS) at $806 million. Company management expects additional demand for AI-related products.

Analysts’ consensus forecasts second-quarter revenue near $4.3 billion, roughly a 51% year-over-year increase, and third-quarter sales around $5 billion, about a 56% year-over-year gain. Street estimates call for full-year revenue near $19.1 billion, up about 54% from the prior year, with projections above $26.8 billion for the following year. Celestica has reported results above estimates in recent periods.

Valuation metrics have risen with the stock. The forward price-to-earnings ratio is about 37, above the sector median near 33 and higher than the company’s five-year average of about 23.

On price charts, shares retreated from a recent high of $473.40 to about $352 and slipped below the 50-day moving average. Technical observers describe a head-and-shoulders-like pattern with a neckline near $326 and a declining Percentage Price Oscillator. Some technical readings indicate a potential support area near $243.

Shares have gained more than 4,500% over five years, placing Celestica among the largest Canadian companies by market value. The company’s revenue mix, improving margins and contracts with large cloud customers are factors market participants cite when discussing its recent performance.