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Celestica Inc. (NYSE: CLS): Riding the wave of AI Soumyajit Datta January 3, 2025 (Friday) 2:13 AM GMT+9
$Celestica (CLS.US)$ The report by ValueInvestorsClub on RaisingCapital provides an investment thesis for Celestica Inc. (NYSE: CLS). This article summarizes the author's bullish stance. When the evaluation of CLS was conducted by RaisingCapital, CLS shares were trading at $50.00, but the closing price on December 31st was $93.82.
10 AI News that Investors May Have Missed
Celestica Inc. provides supply chain solutions in North America, Europe, and Asia through two segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). The services of these segments are wide-ranging and include product manufacturing, related supply chain services, engineering services, system integration, product licensing, and post-market services. In addition to hardware and software design solutions, they have also ventured into hardware platform solutions including the development of infrastructure platforms.
The CCS segment, supported by a 93% surge in hyper-scaler portfolio revenue in the corporate and communication markets, recorded a 51% growth from the second quarter to the 24th quarter on a year-on-year basis. Hyper-scaler revenue is expected to exceed $4.6 billion and represents over 70% of CCS revenue. Strong demand for AI/ML solutions is expected to continue the growth trajectory in this area. The current penetration rate of accelerated computing is only 2.7%, and demand remains robust at least in the medium term.
ATS segment revenue decreased by 11% due to macro headwinds but is expected to remain positive over the next few years. This growth is expected to be driven by large-scale high-tech giants who prefer overspending to catching up with competitors in AI feature development, maintaining a robust balance sheet for high-level equipment investment.
The gross profit margin has increased by 300bps to 10% and is expected to expand further to 12% due to the growth of high-margin AI business. With a 10x EBITDA multiple and 16x P/E multiple, CLS is trading close to intrinsic value. This value was obtained assuming revenue growth of 24% in 2025, 18% in 2026, and a more sustainable 10% in the long term. However, recent performance emphasizes that if industry demand remains strong and new AI projects bear fruit, these figures could easily be surpassed.
We recognize the potential of CLS as an investment, but our belief lies in expecting some AI stocks to provide higher returns and have greater expectations in a shorter time frame than CLS. If you are looking for AI stocks trading for less than 5 times revenue and more promising than CLS, please refer to the report on the cheapest AI stocks.
10 AI News that Investors May Have Missed
Celestica Inc. provides supply chain solutions in North America, Europe, and Asia through two segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). The services of these segments are wide-ranging and include product manufacturing, related supply chain services, engineering services, system integration, product licensing, and post-market services. In addition to hardware and software design solutions, they have also ventured into hardware platform solutions including the development of infrastructure platforms.
The CCS segment, supported by a 93% surge in hyper-scaler portfolio revenue in the corporate and communication markets, recorded a 51% growth from the second quarter to the 24th quarter on a year-on-year basis. Hyper-scaler revenue is expected to exceed $4.6 billion and represents over 70% of CCS revenue. Strong demand for AI/ML solutions is expected to continue the growth trajectory in this area. The current penetration rate of accelerated computing is only 2.7%, and demand remains robust at least in the medium term.
ATS segment revenue decreased by 11% due to macro headwinds but is expected to remain positive over the next few years. This growth is expected to be driven by large-scale high-tech giants who prefer overspending to catching up with competitors in AI feature development, maintaining a robust balance sheet for high-level equipment investment.
The gross profit margin has increased by 300bps to 10% and is expected to expand further to 12% due to the growth of high-margin AI business. With a 10x EBITDA multiple and 16x P/E multiple, CLS is trading close to intrinsic value. This value was obtained assuming revenue growth of 24% in 2025, 18% in 2026, and a more sustainable 10% in the long term. However, recent performance emphasizes that if industry demand remains strong and new AI projects bear fruit, these figures could easily be surpassed.
We recognize the potential of CLS as an investment, but our belief lies in expecting some AI stocks to provide higher returns and have greater expectations in a shorter time frame than CLS. If you are looking for AI stocks trading for less than 5 times revenue and more promising than CLS, please refer to the report on the cheapest AI stocks.
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