It wasn’t just earnings that caused shares of Celestica (TSX:CLS) to surge this week. The tech stock certainly saw a huge climb on strong results, but the company also received some great news on a global scale.
So, let’s get into why this could mean the stock is now an absurdly great deal.
What happened?
There were two catalysts that caused Celestica stock to climb this week. First, the company reported stellar earnings that beat out estimates last week. The company reported revenue at $2.39 billion, which was a 23% increase year over year. Furthermore, adjusted earnings per share (EPS) were up 65%, hitting $0.91.
The company’s outlook was also strong, with Celestica stock management aiming for $9.45 billion in revenue. And overall analysts were fairly positive with the company’s results.
In particular, analysts were pleased with Celestica stock’s connectivity and cloud solutions (CCS) segment, which saw a 51% increase in revenue. However, there was work to be done in the advanced technology solutions (ATS) segment, which saw an 11% drop.
Yet this was last week. So, what happened this week to cause another surge?
Trade wars
The recent surge in share price also came down to some news in the semiconductor world. Shares of companies in the semiconductor industry surged on reports that the United States would exclude allies now that are working with China on chip exports.
The news stated that allies such as Japan, the Netherlands, and South Korea would all be excluded. This exemption contrasts with earlier reports indicating broader restrictions. The news sent North American stocks surging.
While the potential exclusion highlights ongoing tensions in the U.S.-China technology trade war, impacting global semiconductor supply chains, it was good news for those companies that would see their use likely climb as a result.
This includes Celestica stock
Celestica stock would, therefore, be able to take advantage of this scenario. The company could perform well if the U.S. potentially exempted allies from expanded chip export restrictions because it would ensure a steady supply of advanced chipmaking equipment from key partners.
This would also allow Celestica to maintain its production capabilities and meet the rising demand for advanced technology solutions, particularly in the CCS segment. This segment remains crucial for its growth and profitability. Therefore, this stability in supply chains supports their operational efficiency and strategic priorities.
Altogether, the exemption helps Celestica avoid disruptions that could affect its ability to fulfill orders and execute its strategic priorities, thus supporting overall growth and profitability. That helps with positive market sentiment and investor confidence in Celestica’s ability to navigate supply chain challenges, which could further enhance its stock performance.
Bottom line
Sure, Celestica stock surged this week. Yet it looks like the company has quite a promising future. Even without the recent exemptions, the company has a strong outlook ahead. And despite rising on the news, it’s still down by 16% from 52-week highs. So, if you’re looking for the right time to get in on Celestica stock, it looks like right now is that time.
