CLS - Celestica: Generative AI Boom Is Real - Prospects Remain Bright

2024-05-27 13:55:37 ET

Summary

• Thanks to the promising demand commentaries from NVDA and SMCI, it is apparent that we are in the early innings of generative AI infrastructure boom.
• With continued demand strength for AI/ ML compute/networking products from hyperscaler customers, we can understand why CLS has raised their FY2024 guidance.
• Consensus forward estimates imply accelerated top/ bottom line growth as well, thanks to its manufacturing ramp up in Thailand/Malaysia and the shorter enterprise replacement cycle.
• This is further aided by the robust Free Cash Flow generation and healthier balance sheet, allowing it to capitalize on the robust pricing/ demand trends.
• Despite the recent rally, we believe that CLS remains a compelling long-term Buy with a double digit upside potential.

We previously covered Celestica Inc. ( CLS ) in March 2024, discussing how it had been a beneficiary of the ongoing generative AI boom, with the increased demand for ML/ AI-related products likely to trigger its accelerated top/ bottom line growth through FY2026....

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