CLS - Celestica: Close To Its Fair Value Already

2024-05-16 08:27:06 ET

Summary

• Celestica's Q1 2024 results were strong, driven by robust demand in the Connectivity and Cloud Solutions segment.
• The company aims to return 50% of its FCF to shareholders through stock buybacks, which is a lot.
• Despite positive growth, there may be a period of consolidation ahead as the stock approaches its peak and faces challenges in exceeding management's ambitious guidance.
• My fair value calculation shows that the CLS stock has little to no upside potential at the moment.
• Perhaps I drew a similar conclusion too early 3 months ago, but at the moment I still see it that way - hence the "Hold" rating.

Intro & Thesis

In August 2023 , I initiated coverage of Celestica Inc. ( CLS ) stock and then confirmed the "Buy" rating again in November . Since then, the stock has continued to rise, and at some point, its rally made me cautious against the backdrop of valuation ratios that were moving away from historical averages, and I eventually downgraded CLS to "Hold". Unfortunately for my update at the time and fortunately for those who did not sell CLS but "held" it, the stock has continued to grow strongly:

For further details see: