What’s Happening With Celestica Stock?

July 28th, 2025 by Trefis Team
CLS: Celestica logo
CLS
Celestica

Celestica (NYSE:CLS) has been on a tear lately – the stock is up 80% year-to-date and has more than tripled over the past 12 months. So what’s driving the surge? The company, known for its electronics manufacturing and supply chain services, is riding a wave of demand for AI-powered networking gear and cloud infrastructure, from big tech players. This surge is fueling rapid growth in its Connectivity & Cloud Solutions (CCS) business – a segment that handles everything from servers and storage to high-performance networking hardware. In Q1 2025, CCS revenue hit $1.84 billion, up 28% from the year before. Key AI-related products in this segment include servers, integrated rack solutions, and high-performance networking switches, all critical to modern AI workloads.

The broader AI boom is expected to sustain demand. Major tech players are in the midst of unprecedented infrastructure investment cycles. Amazon is expected to spend up to $105 billion on capital expenditures in 2025. Microsoft, Alphabet, and Meta are forecast to spend $80 billion, $75 billion, and $72 billion, respectively – much of it targeted at AI infrastructure. This should help drive demand for Celestica. So how does the stock look fundamentally and will the momentum hold up?

The stock looks relatively expensive – making it an expensive pick to buy at its current price of around $170. We believe there are some minor concerns with CLS stock. We arrive at our conclusion by comparing the current valuation of CLS stock with its operating performance over the recent years, as well as its current and historical financial condition. Our analysis of Celestica along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. related: Will Q4 Results Move Seagate Stock Higher?

Expensive Valuation, Justified By Growth? 

Celestica’s valuation appears expensive when compared to the broader market. While its price-to-sales (P/S) ratio of 2.0 is lower than the S&P 500’s 3.1, its price-to-earnings (P/E) ratio of 47.8 is significantly higher than the benchmark’s 22.8. That said, this is justified by the company’s strong recent top-line growth. Revenues rose at an average annual rate of 19.3% over the past three years, well ahead of the S&P 500’s 5.3%. Over the last twelve months, Celestica’s Revenues have grown 21% to $10 billion, while the S&P 500 has grown a mere 4.4%.

That said, its profitability still lags. Net income margin over the past year stood at just 4.1% (vs. 11.9% for the S&P 500). However, operating performance is trending positively, with Celestica posting a record adjusted operating margin of 7.1% in the most recent quarter, up from 5.9% in Q1 2024. The improving margin trajectory and strong revenue should eventually translate into higher earnings, and this could justify the company’s lofty valuation.

From a financial health standpoint, Celestica appears solid, with a low debt-to-equity ratio of 4.8% which is well below the S&P 500 average of 22.6%. It has a moderate cash holding representing 5.2% of its total assets. However, the stock has historically shown sensitivity to market drawdowns. For instance, during the Covid-19 market crash, CLS plunged 69% compared to a 33.9% decline for the S&P 500. Similarly, in 2022, through the inflation shock, the stock dropped 35.6% during a broader market correction, more than the S&P’s 25.4% decline. There are other risks as well. The company has a large manufacturing footprint in Asia (roughly two thirds of production) and tariffs imposed by the U.S. government could increase supply chain costs and pressure profit margins.

The rich valuation of CLS stock could limit its upside potential in the near-to-mid term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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