Celestica wins price target raise at RBC

RBC Dominion Securities analyst Paul Treiber raised his target price on Celestica (Celestica Stock Quote, Chart, News, Analysts, Financials NYSE:CLS) to US$315.00 from $225.00, while maintaining an “Outperform” rating in an Oct. 23 report, citing “strong AI capex growth” and continued program wins that support both revenue and margin expansion through 2027.

“With continued strong AI capex growth and Celestica’s new program win momentum, we see strong revenue growth and margin expansion through FY26 and FY27,” Treiber said. “In light of robust growth, we anticipate Celestica’s valuation to remain above peers and towards the high end of its historical range.”

Treiber expects Celestica’s third-quarter results, likely to be released on Oct. 27, to beat Street estimates and prompt an upward revision to full-year guidance.

“While we expect FY26 guidance to be conservative, Celestica has averaged actual revenue 13% and adjusted EPS 36% above initial annual guidance over the last two years,” he said.

RBC’s revised estimates call for revenue of US$14.2-billion and adjusted EPS of US$7.15, both above consensus at US$14.0-billion and US$6.89, respectively.

“Rising AI capex underpins Celestica’s growth momentum,” Treiber said, noting that consensus forecasts for capital expenditures at the top five U.S. hyperscalers: Google, Meta, Amazon, Microsoft, and OpenAI, have increased 11% for 2026 and 17% for 2027 over the past three months.

“Some of Celestica’s largest customers have announced significant expansion plans, which bodes well for revenue from existing programs. Our outlook calls for hyperscaler revenue to increase 30% year-over-year in FY26 and 25% in FY27.”

Treiber also highlighted Celestica’s growing role in custom ASIC programs and Ethernet switch production.

“Celestica is well positioned to benefit from the 1.6T Ethernet product cycle,” he said. “It’s one of the top three vendors for Ethernet switches for data centres and continues to gain share as hyperscalers prioritize high-performance (800G) switches from ODMs.”

He said that the recently announced DS6000 1.6T Ethernet switch enhances investor visibility into the next major upgrade cycle, expected to begin in calendar 2026.

Believing Celestica’s premium valuation is justified by its mix of higher-margin, higher-quality revenue, Treiber said the new target is based on 35× CY27 P/E, up from 29×, “given higher visibility to EPS growth through CY27 and Celestica’s increasing exposure to hyperscaler and HPS/ODM segments.”

“Celestica is trading at 42× next-12-month earnings, near the top of its 10-year historical range and well above EMS peers at 19×,” he said. “We expect the premium to be sustained as growth visibility and profitability improve.”

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