On Thursday, Stifel has increased the price target for Celestica (NYSE:CLS) to $58 from the previous $51 while maintaining a Hold rating on the stock. The revision follows Celestica's recent financial performance, which surpassed expectations due to significant growth within its Connectivity & Cloud segment. This segment, bolstered by hyperscale customers, exhibited a 51% year-over-year increase in the second quarter.
The firm's decision to adjust the price target is based on Celestica's announcement of a solid beat-and-raise, with both sales and EPS exceeding Wall Street predictions. The company has been experiencing robust growth from its hyperscale customers, which are projected to account for over 70% of its Connectivity & Cloud segment's revenue. Celestica has also indicated an uptick in growth within its networking operations, driven by investments in 400G and the early stages of 800G technologies, leading it to raise its FY24 sales target to $9.45 billion.
Despite the positive growth trajectory, Celestica's management anticipates a sales challenge within its Enterprise (server) segment going into FY25, attributed to a technology transition by a major customer. However, a rebound in growth is expected in late FY25. While Celestica has not revised its FY25 forecast, the analyst from Stifel believes that their new estimates for FY25, which include $10.23 billion in sales, marking an 8% growth, and EPS of $4.00, are reasonable.
The new price target of $58 represents a valuation just under 15 times forward earnings, which positions Celestica ahead of many of its peers. Despite the optimistic growth estimates and revised price target, Stifel has chosen to retain a Hold rating on Celestica shares.
In other recent news, Celestica Inc . has been the subject of significant developments, including a strong Q1 2024 performance marked by revenues of $2.21 billion and an adjusted earnings per share (EPS) of $0.86, primarily driven by the Capital Equipment Solutions segment and hyperscale customer demand. Following this robust performance, Celestica has raised its full-year outlook, now anticipating a 14% increase in revenue to $9.1 billion and a 36% rise in adjusted EPS to $3.30 for 2024. BMO Capital Markets, after recent investor meetings, increased its price target for Celestica to Cdn$63.00, maintaining an Outperform rating and expressing confidence in the company's future performance due to its focus on AI-driven hyperscaler capital expenditures.
Stifel also raised its price target for Celestica to $51.00, citing the company's strong positioning in data-center computing and broader industrial markets. However, a CIBC analyst downgraded Celestica from Outperformer to Neutral, despite raising the stock price target to $49, due to concerns over potential slower growth in the Enterprise segment. These are recent developments highlighting the company's financial performance and analyst perspectives.
InvestingPro Insights
As Celestica (NYSE:CLS) continues to navigate through its growth phases, recent InvestingPro data and insights provide a deeper understanding of the company's financial health and market position. The company's market capitalization stands at $6.08 billion, and it is trading at a Price-Earnings (P/E) ratio of 16.96, which is considered low relative to its near-term earnings growth. This aligns with Stifel's positive outlook on Celestica's valuation.
The company has shown a solid revenue growth of 10.79% over the last twelve months as of Q1 2024, signaling the strong performance that led to Stifel's price target increase. Furthermore, Celestica has demonstrated a remarkable 223.18% return over the last year, which may interest investors looking for high-performing stocks in the Electronic Equipment, Instruments & Components industry.
InvestingPro Tips highlight that Celestica is a prominent player in its industry and has been profitable over the last twelve months. Additionally, the company has been aggressively buying back shares, which could be indicative of management's confidence in the company's future performance. With a strong return over the last three months and a large price uptick over the last six months, Celestica seems to be on a positive trajectory.
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