To The Moon

Highlights CLS ODM’s explosive potential and ties it to the company’s valuation

$Celestica(CLS)$ is primed for a re-rating, and the numbers scream opportunity! CLS hit a dazzling $144.27 peak on February 5, 2025, after a 134% surge from $36.93 two years ago (March 2023). Now at $86.59 (March 12, 2025), it’s still up 92% from $44.94 a year ago (March 2024)—but analysts say it’s undervalued for what’s coming. This Toronto-based electronics manufacturing services (EMS) giant posted a 21% revenue leap in 2024 to $9.65 billion, fueled by its Connectivity & Cloud Solutions (CCS) segment—think AI servers and 5G gear for hyperscalers like Alphabet and Amazon. Its Advanced Technology Solutions (ATS) segment powers aerospace, defense, and health tech across 50+ global sites.

The kicker? Celestica’s Original Design Manufacturing (ODM) business could send it soaring. Unlike standard EMS, ODM means designing custom tech—like AI-optimized hardware or 5G solutions—from scratch. With AI spending eyeing $300 billion by 2026 and 5G booming, ODM’s higher margins and scalability could turn growth parabolic. Analysts forecast $10.81 billion in 2025 (12% growth) and $12.72 billion in 2026 (18% growth), yet at a $10.04 billion market cap and a forward P/E below its peers, CLS looks ripe for a valuation reset. Rated a ‘Strong Buy,’ this tech supply chain beast might reclaim—and exceed—that February peak. Time for Wall Street to wake up?

Current Valuation Context: As of March 12, 2025, CLS’s market cap is $10.04 billion, with a current price of $86.59. Post-Q4 2024 earnings (January 29, 2025), it reported $1.11 adjusted EPS and $2.55 billion revenue, with 2025 guidance at $4.75 EPS and $10.7 billion revenue. This gives a forward P/E of ~18.2 ($86.59 / $4.75), which is reasonable but potentially low compared to high-growth tech peers (e.g., Nvidia’s 50+ or Jabil’s 20+).

Growth Catalysts:

ODM Potential: The shift to higher-margin, design-led ODM business (custom AI/5G hardware) could boost profitability beyond traditional EMS, warranting a premium valuation.

Revenue Trajectory: 12% growth in 2025 and 18% in 2026 outpace many EMS rivals, yet CLS trades at a discount to its 240% two-year stock run.

Market Trends: AI and 5G tailwinds align Celestica with hotter sectors, suggesting its current multiple doesn’t fully price in this exposure.

Post-Peak Pullback: The drop from $144.27 to $86.59 might reflect short-term noise (tariffs, market rotation), not fundamentals, making it a buying opportunity if re-rated upward.

Analyst Sentiment: The ‘Strong Buy’ rating (e.g., Zacks Rank #1, Yahoo Finance’s $125+ targets) supports a case for a higher multiple—say, 25x forward earnings, pushing CLS toward $118+ on 2025 EPS alone.

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