RBC Capital has maintained its Outperform rating on Celestica (NYSE: NYSE:CLS) while increasing the price target to $65.00 from $63.00 after the company's Q2 results, which were characterized by a strong performance exceeding expectations.
The company's second-quarter success was noted, yet the stock's lackluster response on the same day was attributed to investor concerns. These concerns centered around the potential impact of a program transition at Celestica's largest customer, which might limit the company's growth prospects in the latter half of 2024, RBC Capital pointed out in a note on Friday.
"Celestica reported another strong beat and raise Q2. However, the muted share reaction today reflects market concerns that the program transition at Celestica's largest customer may restrain the magnitude of upside in the second half of 2024.," said an analyst.
However, RBC Capital remains optimistic about Celestica's future as it anticipates that Celestica's expansion into the hyperscaler market will continue to fuel strong growth throughout the rest of 2024 and into 2025.
"The muted share reaction today reflects market concerns that the program transition at Celestica's largest customer may restrain the magnitude of upside in the second half of 2024," said the analyst, adding, "Celestica's diversifying hyperscaler momentum will help drive solid growth through the remainder of 2024 and 2025, in our view. Maintain Outperform, increasing price target from $63.00 to $65.00."
InvestingPro Insights
As Celestica (NYSE: CLS) garners attention from RBC Capital's recent price target increase, real-time data from InvestingPro enriches the narrative around the company's performance and prospects. The market cap of Celestica stands at $6.06 billion, reflecting significant investor interest. With a P/E ratio of 16.96 and a PEG ratio of just 0.15, the company presents an attractive proposition for value-oriented investors seeking growth at a reasonable price. Additionally, a robust revenue growth of 13.45% over the last twelve months as of Q2 2024 suggests that the company is expanding its market reach effectively.
InvestingPro Tips highlight that management's aggressive share buybacks and positive earnings revisions by four analysts for the upcoming period could signal confidence in Celestica's strategic direction. Moreover, the company's strong return over the last year, with a 210.27% price total return, juxtaposed with a recent price dip, may present a timely opportunity for investors. Celestica's position as a prominent player in the Electronic Equipment, Instruments & Components industry, coupled with predictions of profitability this year, underpins the optimistic outlook shared by RBC Capital.
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