Thank you very much in advance?
CLS trades at 44X forward earnings, and we think if some of the hyperscalers eventually announce a slowing in Capex spend on data centers and AI hardware, that CLS could see a 20%+ pullback. Much depends on the magnitude of hyperscalers eventually pulling back on data center spend, but we think at 44X earnings, there is still some investor skepticism and concern priced in here (for example, some large consumer staples names like COST and WMT trade at 40X earnings or more).
In the event of a market wide drawdown, we think CLS could decline with the market, and likely more than the market, given its premium valuation, and high volatility levels.
With that said, trying to anticipate a top is quite difficult, and in the meantime, the stock has run up over 20X since the AI revolution in 2023 began.