After delivering a jaw-dropping 770% return over the past two years, Celestica (TSX:CLS) is starting 2025 with incredible momentum. The stock has already surged another 28% in January, trading at $169.40 per share with a market cap of $19.7 billion, far outpacing the TSX Composite Index’s 2.2% year-to-date gain.
Investors are clearly optimistic about Celestica’s ability to maintain its impressive growth trajectory in 2025 with the support of the strong demand in its core segments, including connectivity and cloud solutions (CCS) and advanced technology solutions (ATS).
But where will Celestica stock be in three years? In this article, I’ll highlight the company’s main growth drivers, industry trends, and some other key fundamentals to help you decide whether CLS stock has the potential to keep soaring.
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Key drivers behind Celestica stock’s rally in recent years
Celestica’s stellar performance could primarily be attributed to a combination of its robust operational execution, strategic partnerships, and a clear focus on growth-oriented, high-demand sectors. While the company is yet to announce its fourth-quarter 2024 earnings (to be announced on January 29), its third-quarter results showcased its ability to navigate complex supply chains while delivering strong financial performance.
In the third quarter alone, Celestica posted a strong 22.3% YoY (year-over-year) rise in sales to US$2.5 billion. This sales growth was mainly fueled by a 42% surge in its CCS segment revenue amid increasing demand for high-performance cloud and networking infrastructure. With a CCS segment margin improving from 6.2% to 7.6% in the latest quarter, this segment is not just scaling but also becoming more profitable for Celestica.
Moreover, the company’s ATS segment, though it experienced a slight 5% YoY revenue decline in the third quarter, continued to be a strong pillar. With this division, Celestica mainly provides solutions for industries like aerospace, defence, healthcare, and renewable energy. While challenges were visible due to the ongoing macroeconomic uncertainties and higher competition, the segment still maintained a healthy margin of 4.8%.
Focus on new partnerships
Besides the numbers, Celestica’s continued focus on strategic partnerships might have also played a key role in boosting investors’ confidence. For example, it recently collaborated with Groq, a California-based company focused on artificial intelligence (AI). Under this partnership, Celestica will help Groq manufacture AI and machine learning servers.
Similarly, Celestica’s recent win of a major hyperscaler customer for high-bandwidth switching technology reflects its growing presence in the networking solutions space.
A promising three-year outlook
While it’s nearly impossible for anyone to predict where CLS stock will be three years from now, Celestica’s current operational momentum and strong fundamentals give us many reasons to be optimistic about its outlook.
While Street analysts expect its full-year 2024 revenue to be around $9.6 billion, the company projects its 2025 revenue to exceed the $10 billion mark to reach $10.4 billion. It also expects to see a 15% YoY increase in its adjusted earnings per share with the help of continued momentum in both the CCS and ATS segments.
Moreover, as AI, cloud computing, and data centres continue to expand globally, I wouldn’t be surprised if Celestica stock maintains its solid upward trajectory over the next three years.
