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Will Celestica's Latest Portfolio Expansion Buoy CLS Stock?
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Celestica Inc. (CLS - Free Report) recently launched DS4100 – a 1U 800G per port top-of-rack, leaf/spine switch – to cater to the high-bandwidth demands of data center networking across the enterprise, service provider and cloud provider domains. The latest addition to the Hardware Platform Solutions portfolio will help Celestica offer a comprehensive 800G data center switch lineup for demanding applications like artificial intelligence/machine learning (AI/ML) with the redundancy and flexibility required of modern data centers.
Designed with Broadcom Inc. (AVGO - Free Report) TH4-12.8T switch chipset, the DS4100 features 16x 800G OSFP ports, delivering 12.8Tbps non-blocking switching capacity in a compact 1U form factor with field-replaceable fans and redundant hot-swappable power supplies. In addition, it is powered by an x86-based CPU, delivering high performance to address a variety of critical data center applications.
With more than 25 years of experience in manufacturing backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The newly launched product reinforces these commitments being optimized for key use cases in AI/ML and Big Data Analytics, hyperscale data centers and cloud computing, high-performance computing and network backbone.
Portfolio Strength: CLS’ Key Growth Driver
Celestia had benefited from the ongoing generative AI boom, thanks to the solid demand trends for AI/ML compute and networking products from hyperscale customers. In addition to the high-performance 800G family of network switches (which are vital for data centers that power AI applications) and storage solutions like the SC6100 controller and SD6200 platform (which provide efficient and scalable data storage for AI), Celestia offers Photonic Fabric – an optical compute and memory fabric solution capable of supercharging AI infrastructure. This solution provides a foundational technology to advance AI while maintaining scalable, sustainable and profitable business models.
By integrating next-generation networking products with silicon photonics packaging solutions, Celestica aims to optimize supply chain solutions to reduce time to market. The data center switches combined with optical transceivers have the potential to handle and sustain high volumes of both inbound and outbound network traffic and cater to the demand for data center bandwidth for supporting AI/ML and data analytics applications. These state-of-the-art products have translated into solid top-line growth in recent years.
Image Source: Zacks Investment Research
Price Performance of CLS
Leveraging solid demand trends driven by healthy AI traction, CLS stock has surged 127.9% over the past year compared with the industry’s growth of 18%. It has outperformed peers like Flex Ltd. (FLEX - Free Report) and Jabil Inc. (JBL - Free Report) over this period.
One-Year Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend for CLS
Earnings estimates for Celestia for 2024 and 2025 have remained stable at $3.65 and $3.99, respectively, over the past 60 days. This depicts a neutral stance on the stock, with investors being neither too bullish nor too bearish about the stock’s growth potential.
High Operating Expenses Dent CLS’ Prospects
Celestica’s products are highly sophisticated and typically based on the latest technological innovations that have historically led to high research and development costs. High operating expenses have contracted margins, resulting in almost a flat net income growth curve for the company for the past few years. This has dented CLS’ growth prospects to some extent.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
End Note
With a diverse portfolio of products that form an integral part of AI applications, Celestica’s remarkable transformation in recent years offers a competitive edge across the broader technology market. The company is well poised for sustained growth over the years, backed by its robust infrastructure investments, solid technology know-how and wide industry experience. As the company scales up production volumes and costs go down, possible uses for silicon photonics are likely to soar across several industries, including automotive, data center and high-performance computing, telecommunications, medical, aerospace and defense.
However, with a Zacks Rank #3 (Hold), Celestica appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. The flat trajectory in estimate revisions further portrays a neutral stance about the company’s business model. High operating expenses remain a potent headwind for the company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Will Celestica's Latest Portfolio Expansion Buoy CLS Stock?
Celestica Inc. (CLS - Free Report) recently launched DS4100 – a 1U 800G per port top-of-rack, leaf/spine switch – to cater to the high-bandwidth demands of data center networking across the enterprise, service provider and cloud provider domains. The latest addition to the Hardware Platform Solutions portfolio will help Celestica offer a comprehensive 800G data center switch lineup for demanding applications like artificial intelligence/machine learning (AI/ML) with the redundancy and flexibility required of modern data centers.
Designed with Broadcom Inc. (AVGO - Free Report) TH4-12.8T switch chipset, the DS4100 features 16x 800G OSFP ports, delivering 12.8Tbps non-blocking switching capacity in a compact 1U form factor with field-replaceable fans and redundant hot-swappable power supplies. In addition, it is powered by an x86-based CPU, delivering high performance to address a variety of critical data center applications.
With more than 25 years of experience in manufacturing backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The newly launched product reinforces these commitments being optimized for key use cases in AI/ML and Big Data Analytics, hyperscale data centers and cloud computing, high-performance computing and network backbone.
Portfolio Strength: CLS’ Key Growth Driver
Celestia had benefited from the ongoing generative AI boom, thanks to the solid demand trends for AI/ML compute and networking products from hyperscale customers. In addition to the high-performance 800G family of network switches (which are vital for data centers that power AI applications) and storage solutions like the SC6100 controller and SD6200 platform (which provide efficient and scalable data storage for AI), Celestia offers Photonic Fabric – an optical compute and memory fabric solution capable of supercharging AI infrastructure. This solution provides a foundational technology to advance AI while maintaining scalable, sustainable and profitable business models.
By integrating next-generation networking products with silicon photonics packaging solutions, Celestica aims to optimize supply chain solutions to reduce time to market. The data center switches combined with optical transceivers have the potential to handle and sustain high volumes of both inbound and outbound network traffic and cater to the demand for data center bandwidth for supporting AI/ML and data analytics applications. These state-of-the-art products have translated into solid top-line growth in recent years.
Image Source: Zacks Investment Research
Price Performance of CLS
Leveraging solid demand trends driven by healthy AI traction, CLS stock has surged 127.9% over the past year compared with the industry’s growth of 18%. It has outperformed peers like Flex Ltd. (FLEX - Free Report) and Jabil Inc. (JBL - Free Report) over this period.
One-Year Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend for CLS
Earnings estimates for Celestia for 2024 and 2025 have remained stable at $3.65 and $3.99, respectively, over the past 60 days. This depicts a neutral stance on the stock, with investors being neither too bullish nor too bearish about the stock’s growth potential.
High Operating Expenses Dent CLS’ Prospects
Celestica’s products are highly sophisticated and typically based on the latest technological innovations that have historically led to high research and development costs. High operating expenses have contracted margins, resulting in almost a flat net income growth curve for the company for the past few years. This has dented CLS’ growth prospects to some extent.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
End Note
With a diverse portfolio of products that form an integral part of AI applications, Celestica’s remarkable transformation in recent years offers a competitive edge across the broader technology market. The company is well poised for sustained growth over the years, backed by its robust infrastructure investments, solid technology know-how and wide industry experience. As the company scales up production volumes and costs go down, possible uses for silicon photonics are likely to soar across several industries, including automotive, data center and high-performance computing, telecommunications, medical, aerospace and defense.
However, with a Zacks Rank #3 (Hold), Celestica appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. The flat trajectory in estimate revisions further portrays a neutral stance about the company’s business model. High operating expenses remain a potent headwind for the company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.