Should You Forget Nvidia and Buy This Tech Stock Instead?
Saturday, Dec 28, 2024 10:49 am ET
6min read Celestica Inc. (NYSE: CLS) (TSX: CLS), a leader in design, manufacturing, hardware platform, and supply chain solutions, has been making waves in the tech industry with its impressive financial performance and growth prospects. As investors consider alternative tech stocks to Nvidia Corporation (NASDAQ: NVDA), Celestica's strong fundamentals and attractive valuation make it an appealing choice. Let's dive into the reasons why Celestica might be a better investment than Nvidia.
CEG Revenue By Business
| Name |
|---|
| Date |
| Revenue By Business |
| Constellation EnergyCEG |
| 2024 |
| 1.24B |
Celestica posted revenue of $7.96 billion in 2023, an increase of 9.81% compared to the previous year. Its earnings also grew significantly, increasing by 68.11% to $244.60 million in 2023. The company's strong financial performance is driven by tailwinds in its Connectivity & Cloud Solutions (CCS) segments' end markets and a mix-shift towards higher-margin products.
CLS Total Revenue year-on-year growth value
| Name |
|---|
| Date |
| Total Revenue year-on-year growth value |
| CelesticaCLS |
| 20240930 |
| 456.20M |
Celestica's growth is more sustainable in the long term because it is driven by a mix-shift towards higher-margin products and a strong demand for its supply chain solutions. The company's diversified business model, which includes Advanced Technology Solutions (ATS) and CCS, also contributes to its long-term sustainability. Additionally, Celestica's strategic investments in AI, R&D, and geopolitical trends position it well for sustained growth.
Celestica's valuation metrics are more attractive compared to Nvidia's. Celestica's estimated P/E ratio is around 18.6x, while Nvidia's is around 35x. Celestica's estimated EV/EBITDA is around 12.5x, while Nvidia's is around 25x. Given Celestica's strong growth prospects and lower valuation, it appears to be a more attractive investment opportunity.
TKR Average Price Target, Closing Price
CLS stock has trended well according to the average consensus price targets over the last year. Therefore, the current volatility in CLS stock could represent a fantastic opportunity for investors to add more exposure. It's also within our fair value zone (+/- 10%), and therefore adding at the current price seems reasonable. Consequently, we reiterate our Buy rating on CLS stock.
In conclusion, Celestica's strong financial performance, sustainable growth prospects, and attractive valuation make it an appealing alternative to Nvidia. While Nvidia is a dominant player in the AI hardware and software market, Celestica's role in the supply chain and hardware platform solutions provides a solid foundation for future growth. Investors should consider adding Celestica to their portfolios as a way to gain exposure to the growing AI and data center markets while benefiting from its lower valuation and strong growth prospects.
