Celestica Inc . (NYSE:CLS) was upgraded to Buy at TD Cowen and RBC Capital (Outperform) by analysts at each firm on Friday.
TD Cowen's analysts raised the firm's price target on the stock to $23 from $14.50, telling investors that the company's second-quarter results revealed strong AI demand.
"We are upgrading CLS to BUY, from Hold, given our view that there could be further upside as the AI investment cycle accelerates," the analysts wrote in his note.
"With Alphabet (NASDAQ:GOOGL)'s recent intent to accelerate its AI infrastructure build-out, we believe other hyperscale cloud vendors could follow suit. Meta noted that its 2024 capex would be higher as it invests for GenAI. We believe Celestica could be a beneficiary of that," he added. "Management is guiding to 10% EPS growth in 2024, which we believe translates into 4% revenue growth. We believe this is conservative, given the AI investment cycle."
At RBC Capital, analysts raised the CLS price target to $22 from $14 per share. Reacting to the earnings release, they told investors that the company is "firing on all cylinders."
"While our longer-term concerns around the electronics manufacturing industry and Celestica's potential long-term growth rate and margins remain, we believe the secular growth in hyperscaler spending and potential for further guidance raises provide a catalyst for the valuation discount compared to peers to close, which improves the risk/reward on the stock, in our view," said the analysts.