Stock price when the opinion was issued
It continues to work, even weathering the DeepSeek storm earlier this week. His only concern is on the semiconductors, SMH and SOXX. This name is part of that group, and the group is lagging the broader market. If the broader semi space comes under pressure, CLS will likely follow suit.
CLS traded at a forward P/E of below 10X for years until 2023 when its AI segment began generating significant growth. Its forward P/E has climbed to 24X, and for a company with steady margins and expecting to grow earnings in the 20%+ range for the next couple of years, we believe a forward P/E in the range of 20X to 25X makes sense. A 30X forward multiple could be justified if management guides for higher growth rates and it can execute on expanding its profit margins. Much of this also depends on the sustainability of the AI story and if we eventually witness a CAPEX down cycle for data centers and chips. Overall, we continue to like the name here.
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Analyze companies day by day, ask if it's still meeting expectations. He owns this one in his Canadian portfolio, and in his US small-cap. Last week, it reaffirmed 2025 growth expectations. More than 1/2 its business is directed at data centre development. Parabolic move, but fundamentals have also grown very well. Valuation still undemanding.
Keep an eye on it, and don't get carried away with price momentum. Trim if it gets too big a position in your portfolio. There's a difference between a trim (portfolio management) and a sell (based on fundamental value).
Volatile the past year, though paying great returns. After a sleepy history, it is now benefitting from the AI build-out as it works with Broadcom. The recent downturn is tied to headlines of a slowdown in building date centres. Ultimately, revenues will increase over 2-3 years, and the 2028 outlook will drive this stock higher.