Celestica (TSX:CLS): Is the Market Overvaluing This Tech Stock After a Quiet Surge?

Celestica (TSX:CLS) has certainly made its way onto investors’ watchlists, thanks in part to a recent move that might seem puzzling in the absence of a major headline event. Sometimes, stock movements happen quietly, prompting investors to pause and wonder if there is a story beneath the surface. Perhaps a new narrative is forming, or it is just the market re-evaluating what the company is worth. Either way, the action around Celestica is capturing attention right now.

Looking at the numbers, it’s clear that momentum has been building throughout the year. Over the past year, Celestica has delivered a strong total return, far outpacing the broader market. Notably, the stock has surged more than fourfold over the past year, capped off by a dramatic rise in recent months. Short-term performance has also been eye-catching, with a substantial jump in the past three months and even more pronounced gains in just the past week.

After such a rapid climb, is Celestica undervalued, or is the market already pricing in every last bit of growth? Let’s dig into the details and see what the numbers really say.

Most Popular Narrative: 8% Overvalued

According to the most widely followed narrative, Celestica is currently trading above what analysts consider its fair value, based on forward-looking financial projections and recent business momentum.

Widespread digital transformation initiatives and technology transitions (AI/ML compute, next-gen racks) across hyperscalers and digital native customers are expanding Celestica's design pipeline and deepening customer engagements. This increases revenue visibility and improves per-customer revenue potential.

Curious about the story behind Celestica’s soaring valuation? There is one crucial growth engine powering these ambitious price targets. It revolves around accelerating demand, new tech investments, and a transformation of the company’s revenue mix. The real surprise? The numbers that analysts are betting on to justify this premium. Do not miss what could be a game-changing set of assumptions fueling this view.

Result: Fair Value of $311.34 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, heavy reliance on a handful of major customers and an abrupt slowdown in AI investments could quickly challenge this optimistic outlook.

Find out about the key risks to this Celestica narrative.

Another View: What Does Our DCF Model Indicate?

While analyst price targets suggest Celestica is slightly overvalued, our SWS DCF model paints a different picture. This model indicates shares may be trading well above fair value. Could this model be signaling a downside others miss?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Celestica for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Celestica Narrative

If you see things differently or want to dig into the details yourself, creating your own take is straightforward and takes just a few minutes. Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Celestica.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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