What a storm it’s been for some of the high-tech high-flyers in recent months. As the volatility kicks things up a notch, the stakes involved with selling in a panic, I believe, are that much heightened. Just have a look at shares of Canada’s own red-hot AI winner, Celestica (TSX: CLS), which nosedived close to 12% in a single day (or around 37% in a month) before bouncing back very sharply, up more than 8% in Wednesday’s session. That’s some serious volatility in both directions.
And while news events have undoubtedly moved the needle, with shares nosediving on AI chip jitters before rocketing on a huge comeback day for tech and the AI trade, I do think that investors should play the long game rather than looking for an exit after a breakdown or blindly adding to a position without keeping up to date on an industry that really is moving at an obscene speed.
Like it or not, all this high volatility increases the chance of a market mispricing. The only question is whether Mr. Market is pricing the shares too high or too low in a market where investors are increasingly jittery about where AI goes from here.
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Volatility is off the charts with CLS stock, but so too could be the value
While Celestica certainly stands out as one of the more attractively valued plays in AI chips, I do expect that shares could continue to follow in the footsteps of other AI high-flyers, many of which may deserve to take a big hit to the chin. Indeed, it’s hard to pull away from the pack when the industry is up against it.
And while I have no idea what’s in store for Celestica as it stays hyper-volatile in bear market territory (now down around 36% from its all-time high hit at the start of June), I do think that dip-buyers and contrarians will eventually have an opportunity to get back into a name that I think has far more to offer in the way of growth, even as investors question the durability of the AI trade.
With the firm recently clocking in some impressive third-quarter numbers alongside a hiked sales outlook, perhaps this is the moment that Celestica might be able to act a bit more resilient than most of the other AI hardware plays getting caught in the recent downdraft.
Indeed, Celestica’s growth trajectory is still intact. Not much has changed about that, as management showed its confidence following a quarter that might just allow shares of CLS to regain more of the ground it had lost in recent months.
So, is Celestica stock more of a buy or a sell as doubts grow across the AI scene as a whole?
For long-term investors who can handle the volatility, I think 12.3 times forward price-to-earnings (P/E) is a fantastic deal for a company that’s continuing to grow at a blistering pace. In fact, it’s an obscene multiple that some may view as too good to be true.
The firm has been really shattering expectations and, in my view, remains underrated versus some of the U.S. AI hardware plays that have hogged the headlines of late. It won’t be smooth sailing for Celestica, but if you’re okay with embracing short-term pain for long-term gain, I think CLS stock is more of a buy than a sell here, especially when you consider the hyper-grower trades more like a deep-value stock.
