Celestica (CLS) just got a fresh vote of confidence. UBS upgraded the stock from “Neutral” to “Buy” and raised its price target from $410 to $430. Analyst David Vogt pointed to strong AI-driven demand for Celestica’s Ethernet switching and compute hardware. He also flagged a 1.6-terabit rack-scale system the company is building for OpenAI. Vogt expects all of this to push the revenue and earnings higher. He said that even while staying conservative, he sees earnings per share climbing at roughly a 50% yearly pace over two years. This would take the EPS from $10.83 this year to $24.72 by 2028.
The business is already booming. In its latest quarter, Celestica grew revenue 62% to $4.70 billion, and adjusted operating margin hit a company record. Management has since raised its full-year outlook twice and now guides for around $20.5 billion in revenue. CEO Rob Mionis said the demand outlook is the strongest in the company’s history.
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The Drop Wasn’t the Warning It Looked Like
Here is what makes the timing interesting. In the first week of August, Celestica raised $3 billion by selling new shares at $310, well below where the stock was trading. The dilution worried investors, and CLS stock was punished, dropping around 13% in a single day. But unlike its investors, UBS is more focused on the upside of what that cash brings. Building rack-scale systems for customers like OpenAI takes capacity, and capacity takes money. The raise that spooked the market is the same raise helping fund the capacity UBS is excited about. So the drop that scared people off may have quietly created the entry point.
Celestica has moved from a background contract manufacturer into a core supplier for the AI buildout, working with Meta (META), Alphabet's (GOOG) (GOOGL) Google, AMD (AMD), and now OpenAI. This is why I believe the cash raise was a win for Celestica. The dilution was a one-time hit, but the demand behind it looks built to last.
About Celestica Stock
Celestica is a technology and manufacturing company that provides supply chain and hardware solutions to businesses around the world. It operates through two main segments, Advanced Technology Solutions, and Connectivity and Cloud Solutions. The company offers a range of product manufacturing and related supply chain services. It also provides services such as sourcing components, managing supply chains, logistics, and after-sales support. The company has a strategic collaboration with Advanced Micro Devices for the development of Helios, a rack-scale AI platform. The company was founded in 1994 and is headquartered in Toronto, Canada.
The stock gained roughly 57% over the past year, marginally underperforming the S&P Technology Hardware Select Industry Index, which delivered returns of 72% during the same period. Despite strong earnings growth, CLS underperformed the S&P Technology Hardware Select Industry Index as investors remained cautious about its high customer concentration. On a year-to-date basis (YTD), the stock has gained just 7%, underperforming the index’s gain of 49%.
www.barchart.com Celestica’s valuation reflects how much the market’s view of the company has changed. The forward GAAP price-to-earnings (P/E) of 25.38x sits 22% above its own 5-year average of 20.75. The forward price-to-sales (P/S) ratio reflects a much steeper premium to its historical average. At 1.64x, it sits 82% above the 5-year average of 0.90x. The EPS outlook explains why investors are willing to pay a premium. Analysts expect earnings to grow 85% in 2026 and 74% in 2027, before easing to 36% in 2028 and 23% in 2029. Even as it slows, that is strong, sustained growth through the end of the decade.
The balance sheet is decent. Celestica holds $537 million in cash against $981 million in debt, leaving only a small net debt position for a company worth roughly $34 billion. The recent $3 billion raise added capital without piling on debt, giving the company room to fund the AI capacity behind all this growth. To me, the premium looks earned rather than stretched.
Strong Q2 Growth Fuels Higher 2026 Guidance
Celestica reported its second-quarter fiscal 2026 earnings on July 27. The company’s quarterly revenue of $4.70 billion was 62% up year-over-year (YoY). The earnings per share came in at $2.54, beating the Wall Street consensus of $3.18. Non-GAAP operating margin for the quarter was 8.2%, up 80 basis points YoY and a record high. The company said growth was driven by both of its main segments. Communications and enterprise demand remained strong, helped by 800G networking products, 400G resilience, and a fast-rising AI compute business. It incurred capital expenditures of $264 million for the quarter.
Looking forward to the third quarter, Celestica guided for revenue of $5.25 billion to $5.55 billion. Adjusted EPS is expected to be between $2.88 and $3.08. Management said communications revenue should grow about 60% in the quarter, while enterprise revenue is expected to rise about 190%, driven by AI compute and storage demand. Moreover, CLS raised its full-year 2026 revenue outlook to $20.5 billion from $19 billion and lifted EPS guidance to $11.30 from $10.15. The company also increased its adjusted operating margin target to 8.4% from 8.1% and raised free cash flow guidance to $600 million.
What Do Analysts Expect for CLS Stock?
Wall Street remained positive on CLS stock. TD Cowen analyst John Shao reiterated a “Buy” rating on CLS and assigned a price target of $430. The firm believes CLS’s recent equity raise materially strengthens its financial position ahead of a challenging fiscal year 2027 supply chain environment. Shao’s rating is based on his confidence that management can deliver earnings growth sufficient to offset the roughly 9% dilution from the offering. He expects the improved balance sheet and added working capital to allow management more room to navigate potential disruptions and to compete more effectively. In addition, UBS analyst David Vogt upgraded CLS to “Buy” from “Neutral” with a price target of $430, up from $410.
Based on 19 Wall Street analysts covering the stock, CLS stock holds a consensus “Strong Buy” rating. Out of those analysts, 18 have a “Strong Buy” rating, and one has a “Moderate Buy” rating. The stock has a mean price target of $464, which implies a further 58% upside from current levels. This upside reflects strong confidence in Celestica’s long-term growth prospects.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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