TSLA - Celestica: Let Your AI Winners Run Further

2024-05-27 08:30:00 ET

Summary

• Celestica stock has continued to outperform the market.
• The leading EMS player is exposed to significant AI growth tailwinds from the leading cloud hyperscalers.
• Celestica's cautious guidance shouldn't be construed negatively, given its record of solid execution and outperformance.
• Given sustainable AI growth drivers, CLS investors shouldn't take profits too early.
• I argue why investors should consider letting their CLS winner run further. Read on.

Celestica Stock Easily Outperformed

Celestica Inc. ( CLS ) investors have outperformed the S&P 500 ( SPX ) ( SPY ) since my bullish CLS article in March 2024. The IT solutions provider is engaged in the Advanced Technology Solutions and Connectivity & Cloud Solutions businesses. As a reminder, the company's ATS segment has pulled down its highly remarkable growth over the past year, attributed to macro headwinds impacting its industrial base. Celestica observed headwinds in "inventory backlog in EV charging amidst a slowdown in demand for electric vehicles." However, Celestica is confident that long-term secular growth drivers in renewable energy infrastructure and solutions (including EV charging) remain favorable. However, the significant EV growth slowdown has affected the whole EV supply chain, suggesting near-term pessimism could persist. In addition, Tesla, Inc.'s ( TSLA ) decision to remove TSLA's "previously stated goal of eventually selling 20 million vehicles a year" could reflect a structurally slower growth cadence....

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