The financial results of NVIDIA for the first quarter (Q1) fiscal 2025 are out, and as expected, they were mind-blowing. Revenue climbed 262.2% to US$26.04 billion versus Q1 fiscal 2024, while net income soared 629.4% year over year to US$14.88 billion. The chipmaker is considered the artificial intelligence (AI) giant, although some market analysts say the AI boom has yet to unfold.
As of May 23, 2024, NVIDIA’s market capitalization is US$2.34 billion. Also, on the same day, the tech stock blew past US$1,000 for the first time. The current share price of US$1,037.99 is 240% higher than a year ago. If you missed the wave, investing in NVIDIA today is too expensive.
Celestica (TSX:CLS) has been trending in the last six months. The $8.76 billion growth-oriented Canadian firm isn’t a chipmaker but provides supply chain electronics manufacturing services. Its upward trajectory resembles that of NVIDIA.
Long growth runway
At $76.07 per share, Celestica investors are up 96.01% year to date compared to NVIDIA’s +109.61%. The U.S. stock advanced 113.1% in six months versus +108.70% for the top Canadian growth stock. In 3.01 years, Celestica rewarded investors with an overall gain of 643.6% against the +593.73% of NVIDIA.
Based on stock performance, Celestica is at par with NVIDIA. Price-wise, the former is the logical choice. You’ll derive nearly the same returns as NVIDIA at less cost. Celestica has a long growth runway with its product offerings suitable for modern businesses
Revenue generators
Celestica serves multiple markets, such as aerospace, and derives revenue from two core business segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). ATS caters to clients in aerospace & defence, capital equipment (robotics and semiconductor), health technology, and industrial. CCS focuses on communications and enterprise-end markets.
Rob Mionis, president and chief executive officer (CEO), said Celestica is off to a solid start in 2024. The robust demand of hyperscale customers in the CCS segment drove revenue and operating margins higher. He added that the growing capital investments by chip manufacturers through 2025, which will support demand for generative AI applications, will support continued momentum in Celestica’s portfolio next year.
Financial highlights and guidance
In Q1 2024, revenue jumped 495.4% to US$2.21 billion versus Q1 2023, while net earnings rose 32.1% year-over-year to US$132.1 million. Notably, adjusted free cash flow ballooned 608.7% to US$65.2 million from a year ago. The CCS segment registered a 38% year-over-year revenue growth, but the ATS segment reported a 3% drop.
The ongoing concern is the adverse impact on inventory levels caused by production delays due to materials constraints. Nevertheless, management updated its revenue outlook for 2024 following the strong performance in the first quarter. Celestica forecast a full-year revenue of US$9.1 billion, representing a 7.1% increase from the previous $8.5 billion.
Regarding new product offerings, Celestica recently launched four networking (Ethernet) switches to meet customers’ evolving needs and connectivity demands.
“Our new enterprise switches exemplify our commitment to engineering and design excellence, enabling our customers to turn edge access into a competitive advantage,” said Gavin Cato, head and chief technology officer for Platform Solutions at Celestica.
Profitable prospect
Some growth investors lament missing out on NVIDIA’s huge gains. However, the chipmaker is just one of the many profitable prospects in the tech space. Celestica’s gains are comparable, and it is well-positioned to deliver far superior returns on a smaller investment.
