Celestica's Bullish Upgrade Clashes with DeepValue's Sell Rating Amid AI Hype and Google Cloud Speculation

What happened

A Seeking Alpha analyst upgraded Celestica to bullish ahead of Q4 2025 earnings, pointing to robust AI networking demand and projected 27-31% revenue growth for 2025-26. The upgrade aims to counter rumors about Google Cloud shifting server assembly orders, with expectations that management will reassure on sustained client relationships. DeepValue's master report, however, maintains a 'POTENTIAL SELL' rating, emphasizing Celestica's high valuation at 52x 2024 EPS and shallow moat despite strong recent performance. The report underscores critical risks from hyperscaler customer concentration, lack of contractual safeguards, and potential margin erosion if AI capex slows after 2026. This divergence highlights a tension between near-term optimism fueled by guidance hikes and structural vulnerabilities that could trigger sharp downside.

Implication

The bullish upgrade reflects market faith in ongoing hyperscaler capex, but DeepValue's analysis warns that Celestica's stock price already embeds aggressive 2026 targets, leaving little room for error. Any misstep in 800G/1.6T ramps or a loss of key programs could rapidly compress both earnings and multiples, given the concentrated customer base and competitive pressures. While Q4 earnings may provide short-term reassurance, the lack of contractual minimums and pricing power means fundamentals are fragile. High free cash flow and record margins offer some support, but they are tied to a cyclical AI upcycle that may not sustain. Long-term investors should consider trimming exposure on strength and waiting for a pullback or clearer proof of durable post-2026 economics.

Thesis delta

The analyst upgrade does not alter DeepValue's core thesis of overvaluation and concentration risk, as it relies on the same hyperscaler trends already priced into the stock. However, it reinforces market sentiment that could buoy shares near-term, but without addressing the shallow moat or potential for margin reversion. Investors should treat any bullish momentum as an opportunity to reduce holdings rather than a signal for new investment.