Celestica price target raised to (US) $225 at RBC

Shares of Celestica (Celestica Stock Quote, Chart, News, Analysts, Financials NYSE:CLS) surged nearly 17% Tuesday (July 29) after the Toronto-based electronics manufacturer posted sharply better-than-expected second-quarter results and raised its full-year outlook.

As reported by The Globe and Mail, RBC Dominion Securities analyst Paul Treiber said the company’s continued strong growth and improving revenue mix support the view that Celestica’s valuation premium is likely to be sustained.

“With Q2 results, Celestica reported its strongest beat and raise in more than two years due to robust demand from hyperscalers,” Mr. Treiber said in a July 30 report. “Guidance remains conservative, which suggests potential upside, in our view.”

Second-quarter revenue and profits far exceeded analyst expectations, propelling Celestica’s market capitalization above CGI Inc. to become the third-largest publicly traded tech company in Canada. The stock has more than doubled year-to-date and is now up 18-fold since the end of 2022.

Citing continued strength in high-performance networking and AI-related infrastructure demand, Celestica raised its 2025 revenue guidance to US$11.55-billion from US$10.85-billion, up 20% year-over-year. Adjusted earnings per share guidance rose to US$5.50 from US$5.00, marking a 42% increase. Both projections were above Street consensus, which had forecast US$10.99-billion in revenue and US$5.08 in EPS.

“Celestica has ‘high confidence’ in its guidance, as customer orders exceed guidance,” Mr. Treiber said. “This suggests upside is likely, in our view.”

Momentum in hyperscaler demand is also helping Celestica gain market share in high-performance networking. Revenue from its largest customer rose 17% year-over-year in Q2, compared with a 1% decline in Q1. The company expects 800G shipments to account for more than half of its networking volume in the second half of 2025, while a next-generation AI/ML custom compute contract is expected to drive a return to positive growth in its CCS Enterprise segment by Q4.

Treiber noted the company now has “visibility to customer demand for the next 12 months” and expects “continued robust growth through at least 1H/FY26.” Additional drivers include the ramp of new 1.6T switch programs and a large contract with a “digital native” customer, which are expected to support growth through FY27. Meanwhile, management expects its ATS business to return to 10% growth in FY26 after flat performance in FY25.

The analyst raised his 2026 forecasts to revenue of US$13.3-billion and adjusted EPS of US$6.35, up from US$13.1-billion and US$6.20. His 2027 estimates also increased to US$15.8-billion in revenue and US$7.75 in EPS, from US$15.7-billion and US$7.58 previously.

“Celestica is seeing increasing breadth and market share with hyperscaler customers in both its networking and enterprise segments,” he said. “For example, all of Celestica’s 400G customers have turned into 800G customers. Momentum reflects Celestica’s execution at scale, best-in-class designs and geographic footprint.”

Celestica’s improving business mix is also yielding margin expansion. Adjusted EBIT margin rose 110 basis points year-over-year to a record 7.4% in Q2.

Treiber reiterated his “Outperform” rating and raised his target price to US$225 from US$185, well above the Street average of US$176.61, according to LSEG data. “We believe Celestica’s premium valuation is likely to be sustained,” he said.

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