Opinions
Peter Hodson
Celestica Inc
CLS-T
WEAK BUY
Jul 29, 2014
Stock price when the opinion was issued
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It doesn't pay a dividend, Assembles materials for data centres and correlates to Nvidia. It has been switching to a more stable recurring revenue sysytem. He wonders about other developments coming and looks for dividend paying stocks with less volatility. He talked about Verses Tech on the Neo exchange (VERS) with a different method of machine learning and AI which uses less computer power and less electricity.
Great Canadian success story. Positioned themselves well to benefit from the AI trend and data centre buildout. Benefiting from semiconductor companies spending huge amounts. Not cheap, but not egregiously overpriced. Huge run, but earnings momentum is there. Take a bit off the table.
In general, margins for contract manufacturers are very thin. But this name's on a roll. Great space, as the world will continue to build data centres. Very strong earnings momentum. Consistent upgrades to earnings estimates, which is what you want in a growth stock. Better than 98% of companies in the S&P over last 52 weeks.
A bit stretched above MAs, may be susceptible to a miss. Reports in 11 days, and no sign that it has big risks.
We would be comfortable today as long as an investor has a 3 year+ timeframe to hold. Funamental momentum is very positive and the recent quarter showed an acceleration of growth.
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Lots of investors are taking profits, generally, now that earnings season is over. Needed a strong stomach for this one; in April, was under $80. He can't even recommend writing some calls, as he's been doing that and it's not working ;) He ended up having to buy the calls back, as he didn't want to get called away.
Don't trim. Hold on, and use a stop of around $250.
Have done a super job to be front and centre in data centres, both back and front end. But this is still cyclical. He sold it after a tremendous run, but left money on the table. The valuation is way at the high end around 40x earnings. This has gone from one extreme to another.
Have done a pretty good job of turning things around. They were in dire straits in the recession when they had overcapacity and their balance sheet wasn’t that great. Have bought back a ton of stock, and are now basically waiting for the economic situation to come to them. This is a later cycle economy stock. When business is so good in the tech world and people need third-party manufacturing that is when they really start to coin. Because they bought back a lot of stock, their earnings leverage will be really good at that point in the cycle. Still a little early for this kind of scenario, but for a 2 or 3 year time frame, you should be okay. Not a bad company.