Why Shares of Celestica Stock Jumped 5% on Monday

Celestica (TSX:CLS) stock continues to see its share price rise higher, but not only because shares of Nvidia (NASDAQ:NVDA) are up as well.

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It can be difficult to find a tech stock that looks safe. There are so many companies out there that analysts and investors believe could be the next big thing. But some of us want stability and safety and still receive growth.

That’s what we’ve been seeing from Celestica (TSX:CLS) these last few months — indeed, the last year! So, let’s look at what’s been influencing the stock to rise higher, including on Monday, when shares popped by 5%.

What happened?

Shares of Celestica stock seem to be rising higher on the back of further strong performance from Nvidia (NASDAQ:NVDA). In this case, Nvidia stock’s 10-for-1 stock split seems to be the culprit.

There continues to be strong financial performance, and the launch of its new generation artificial intelligence (AI) graphic processing units (GPUs) and software platform has boosted investor confidence in related technology stocks, including Celestica.

Nvidia reported significant year-over-year growth in revenue, operating income, and net income, which has highlighted the robust demand for advanced AI chips and related technology. Yet, with a share price in the four-digit range, many didn’t want to sink their savings into the stock.

Enter the June 7th stock split, and shares of Nvidia stock are now climbing higher once more. This shows that positivity around semiconductors and AI continues to be a major focus for investors. Celestica, which provides design, manufacturing, and supply chain solutions for various industries, benefits indirectly from the increased demand for semiconductor components driven by companies like Nvidia. As Nvidia’s growth spurs higher demand for electronic components and manufacturing services, Celestica experiences an uptick in orders, positively affecting its stock performance.

Strong on its own

But beyond Nvidia stock, Celestica stock remains a stellar buy in its own right. Celestica recently reported strong earnings for the first quarter of 2024. Celestica reported non-GAAP earnings per share of $0.86, which was significantly higher than the analyst consensus estimate of $0.72. This beat by $0.14 indicates robust profitability.

Furthermore, the company achieved revenue of $2.21 billion for the quarter. This figure exceeded the forecasted $2.10 billion, showing a solid 5.19% outperformance. Compared to previous quarters, Celestica’s financial performance has shown consistent improvement. The company’s focus on providing comprehensive design, manufacturing, and supply chain solutions for various industries has contributed to its revenue and profit growth.

Looking ahead

Analysts are now quite positive about the future of Celestica stock, with many giving the stock a “Moderate Buy” rating. Most price targets for the next 12 months range between $23 and $60. The average target suggests some potential downside from current levels, indicating mixed sentiment about short-term fluctuations but overall confidence in the company’s performance.

Furthermore, Celestica stock itself has a positive outlook for the future. The company has raised its financial targets for 2024 and beyond, anticipating strong performance driven by its diverse portfolio and robust demand across various sectors. For the remainder of 2024, Celestica expects its non-IFRS adjusted earnings per share (EPS) to remain strong and has forecasted significant revenue growth.

Overall, Celestica stock continues to look like a strong buy, even as shares rise higher — especially on the back of further interest in Nvidia stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Nvidia. The Motley Fool has a disclosure policy.

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