Celestica stock analysis: Will the sell-off continue?

Celestica stock price has slumped in the past few weeks, falling from the all-time high of $655 in June to the current $524. This retreat continued today, even after the company announced a $300 million investment in Texas. So, is it safe to buy the dip?

Celestica announces a major US investment

Celestica, a top Canadian provider key products like storage, compute, and networking, made a major announcement today. It will expand its Texas plant and spend $300 million, a move that will create over 2,300 jobs in the next two years. 

At the same time, the company plans to extend its lease in its existing buildings and is building a new 343k square-foot program. 

This statement came at a time when Celestica’s business is booming, helped by the ongoing artificial intelligence (AI) boom and data center spending. Its top clients like Alphabet, Meta Platforms, Microsoft, Amazon, and Cisco are all spending billions of dollars in their data center. 

Google, its biggest customer, is boosting its spending on its TPU, raising demand for its racks and other high-speed networking products. Earlier this month, it said that it planned to spend $80 billion more in AI.

The most recent results showed that its revenue jumped by 53% in the first quarter. It made $4.05 billion, close to the upper side of the $3.85 billion and $4.15 billion guidance. 

Most of this revenue came from its Connectivity & Cloud Solutions (CCS), which is made up of its servers and storage products. In a statement, the CEO said:

“We continue to see accelerating growth from our CCS customer base, alongside increasing profitability in both our CCS and ATS segments. Driven by this momentum, we are raising our 2026 annual outlook to $19.0 billion in revenue and $10.15 in adjusted EPS.”

Celestica’s growth to continue amid strong data center spending

Wall Street analysts predict that the company has more room for growth amid the resilient data center spending. Data compiled by Yahoo Finance shows that analysts expect that its revenue will be $19.19 billion, higher than what analysts guided. If this happens, it will be a 54% annual growth rate.

Analysts expect that its revenue growth will be 40% next year to $26 billion, which will make it one of the fastest growing Canadian companies. Its EPS is expected to move from $6.05 last year to $10, followed by $15 next year.

Celestica stock price technical analysis

Celestica stock chart | Source: TradingView

The daily chart shows that the Celestica share price has retreated in the past few weeks. This retreat started after the recent Broadcom earnings, which pushed top AI companies lower. 

A closer look shows that the stock has formed a head-and-shoulders pattern, a common bearish sign in technical analysis. The neckline is at $473, its lowest levels since May.

However, it sits above the 50-day Exponential Moving Averages (EMA), a sign that bulls are still hanging on there. Therefore, a drop below the 50-day moving average of $517 will confirm the bearish outlook. 

If this happens, the next level to watch will be at $400. On the other hand, a move above the right shoulder level of $580 will invalidate the bearish outlook.