Celestica (TSX:CLS) shares rose for a second straight session on Wednesday, October 28, as analysts raised their targets after the company's investor day and AI hardware stocks rallied across the board. The stock climbed to $420.54 on the S&P/TSX Composite, leading technology, the index's best sector, a day after its earnings-fuelled surge.

What happened on day two

Tuesday's jump was about the numbers. Wednesday's gain was about Bay Street and Wall Street catching up to them.

Canaccord Genuity raised its target on the stock to $480 from $455 on Wednesday. Analysts uniformly rate the shares a buy, with an average target near US$452 and a high of US$535.

The investor and analyst day on Tuesday morning gave them plenty to model. Celestica set an initial 2027 outlook of about US$40 billion in revenue and adjusted earnings of US$21.50 a share, roughly double this year's levels. Customer demand forecasts for 2028 already sit meaningfully above that 2027 figure, though they depend on when customers deploy.

The rest of the AI hardware group helped. Memory makers Micron and SanDisk both climbed, and power and cooling supplier Vertiv soared after its own beat-and-raise quarter, a sign that money was flowing back into the data-centre buildout trade.

Why it matters

The two-day rally repaired much of a painful October. The stock's New York listing fell from about US$387 on October 2 to US$246.65 on October 26, a slide of more than a third in about three weeks, as investors fretted that AI spending could be peaking. Even after Tuesday's jump, the shares were still well below their 52-week high of US$474.03.

Celestica also gave buyers some comfort on capital. It plans to file for a new normal course issuer bid with the TSX in the fourth quarter, once its current buyback expires on November 2. If accepted, it could buy back a modest slice of its public float over the following year.

The underlying quarter, reported on October 26, remains the foundation. Revenue rose to US$5.83 billion, adjusted earnings were US$3.30 a share, and the company lifted its 2026 revenue outlook to US$21.0 billion from US$20.5 billion.

Profitability is improving too. Celestica said its adjusted operating margin hit another company record in the quarter, and its 2027 outlook assumes a higher margin again. For a contract manufacturer, a business long known for thin margins, that shift is a big part of why investors are willing to pay up.

The risks still on the table

Growth this fast eats cash. Celestica cut its 2026 free cash flow outlook to US$460 million from US$600 million to fund inventory and working capital, and expects capital spending of US$1.5 billion to US$2.0 billion in 2027, up from roughly US$1 billion this year. The company expects a net use of cash next year.

Concentration is another. One customer made up roughly a third of third-quarter revenue, and the top 10 accounted for the vast majority of sales.

The company raised about US$3.45 billion in a stock offering in August and held roughly US$4 billion of cash at the end of September, which gives it room to fund the expansion.

What to watch next

Fourth-quarter guidance calls for revenue of US$6.275 billion to US$6.575 billion and adjusted earnings of US$3.37 to US$3.57 a share. Hitting that range would keep the 2027 target credible.

Watch, too, for the TSX's decision on the new buyback, more analyst target changes, and whether the wider AI hardware group can hold Wednesday's gains. After a two-day run this sharp, any wobble in that trade could hit the stock quickly.