Celestica Inc. ($CLS)
Price: $106.11 | Date: February 26, 2025
Quick Take
Meet the company that’s quietly becoming the backbone of AI’s infrastructure revolution. Celestica has transformed from a traditional electronics manufacturer into a crucial player in building the hardware that powers artificial intelligence. The company’s remarkable 165% stock gain over the past year isn’t just market hype – it’s backed by an 84.7% surge in earnings and growing partnerships with major AI companies.
What makes Celestica particularly interesting is its strategic pivot to high-performance computing and AI infrastructure, which now represents a significant portion of its business. The company has secured major contracts with industry giants, including a switching project with Meta and a full rack AI system for OpenAI.
With projected revenue of $10.7 billion for 2025 and expanding profit margins, Celestica represents a unique way to invest in AI’s growth without paying software-level valuations.
Note: This report is for informational purposes only and does not constitute financial advice. Always conduct your own due diligence before making investment decisions.
Stock Performance
CLS shares have demonstrated exceptional momentum, rising 850%+ over three years. Recent price action shows a healthy pullback (-26%) from all-time highs, potentially offering an entry point for long-term investors. The stock maintains its uptrend above key moving averages despite the correction.
Why It Made the Cut
Celestica stands out for its exceptional operational execution and strategic positioning in high-growth markets. The company’s transformation is reflected in its superior metrics:
- Exceptional Growth: 84.7% earnings growth (5.4x industry average)
- Superior Profitability: 24.3% return on equity (3x industry average)
- Strong Momentum: 165.4% return over 52 weeks
- Market Leadership: Top 3 ranking among all stocks in our comprehensive analysis
Note: These highlights represent just a fraction of our comprehensive analysis, as each stock undergoes rigorous evaluation across 50+ data points using our proprietary screening process before making it into your bi-weekly report.
Business Overview
Celestica operates as a global manufacturing partner for technology companies, specializing in two key areas: Advanced Technology Solutions (aerospace, defense, industrial automation) and Connectivity & Cloud Solutions (data centers, AI infrastructure). The company has strategically positioned itself at the intersection of traditional manufacturing excellence and next-generation technology needs.
What sets Celestica apart is its end-to-end capabilities, from design and engineering to final assembly and testing. The company’s recent focus on AI infrastructure and high-performance computing has transformed it from a traditional contract manufacturer into a critical partner for companies building the future of computing.
Market Opportunity
Celestica is capitalizing on explosive growth in AI infrastructure spending. The AI server market is projected to reach $202 billion by 2025, while the broader data center market is expected to grow by $535.6 billion between 2025-2029.
The company’s strategic position in both traditional industries and emerging technologies creates a unique competitive advantage. Its established relationships with major tech companies and expertise in complex manufacturing make it a preferred partner for AI infrastructure projects.
Financial Analysis
Celestica’s financial performance reflects its successful strategic transformation:
- Revenue Growth: 21.2% YoY (vs. industry decline of -2.3%)
- Operating Margin: 6.48% (54.7% above industry average)
- Return on Equity: 24.27% (206.1% above industry average)
- Forward Outlook: $10.7B revenue projected for 2025
Risk Assessment
While Celestica’s growth story is compelling, investors should consider several risks:
- Valuation Concerns: P/E ratio 45.9% above industry average, possibly already pricing in its future potential
- Customer Concentration: Significant revenue from top AI/hyperscaler clients
- Competition: Increasing interest in AI manufacturing from larger competitors
- Market Dynamics: Potential cyclicality in technology spending
Bottom Line
Celestica represents a unique opportunity to invest in AI’s infrastructure boom through a profitable, established manufacturer. The company’s successful pivot to high-growth markets, strong execution, and improving fundamentals support its premium valuation.
Key metrics to monitor:
- Quarterly AI infrastructure revenue growth
- Operating margin expansion
- New contract wins in high-performance computing
- Customer concentration levels
While the recent pullback may present an attractive entry point, investors should size positions appropriately given the stock’s significant recent gains and premium valuation.
