Shares of Celestica (NYSE:CLS) rose 13% on Friday after RBC Capital upgraded the electronics company to Outperform from Sector Perform, and increased the PT to $22 from $14.
Brokerage’s PT of $22 represents a premium of 22% to CLS’ last close.
Celestica posted better-than-expected Q2 results on Wednesday. It also increased its full-year 2023 guidance for revenue and adj. EPS.
RBC notes that while it has concerns about Celestica’s long-term growth rate and margins and the electronics industry at large, it sees growth in hyperscaler spending and possible guidance hikes improving the risk/reward on CLS.
Brokerage believes the company’s simpler voting structure, improved free cash flow, and potential upside from higher from AI-driven data center spending, “has now provided a catalyst for Celestica’s multiple to increase closer to the peer group.”
“While the risk of a pullback in hyperscaler spending remains, it is partially mitigated by Celestica’s better business mix and higher level of FCF generation as compared to prior downturns,” said RBC Capital.
RBC’s Outperform rating compares with SA Quant rating of Strong Buy and average Wall Street rating of Buy.