TSX:CLS - Post Discussion
Post by
retiredcf on Nov 01, 2024 12:16pm
TD Notes
AMZN Q3/24 READ-THROUGH: HEALTHY ECOM SPEND; CONTINUED CAPEX RAMP
THE TD COWEN INSIGHT
Amazon's strong Q3/24 results point to continued growth in hyperscale capex ramps
next year, driven by solid demand for AI, and is supportive of our view that Celestica's 2025E guidance could be conservative. Consumer spending trends also appear stable, with acceleration in online net sales growth, supporting continued strength in Shopify's GMV as we enter the 2024 holiday shopping season.
Impact: POSITIVE read-through for CLS and SHOP
See TD Cowen's report here for a review of the results.
CLS (C$68.40, Buy) read-through: POSITIVE. A consistent theme across all major hyperscalers is that capex investment in data center hardware is set to further grow in 2025 after record spend in 2024 to support the rising demand for AI workloads. While the majority of spend remains on servers to support increased compute capacity, networking investments have begun to ramp as we expected, highlighted in our recent networking deep dive. Amazon management guided to 2024E capex of $75bln, up ~56% y/y. TD Cowen estimates $84bln in 2025E capex, up from previous estimates of $74bln. Revised consensus capex estimates for Celestica's top three hyperscale customers call for ~16% y/y growth next year on average, above the ~15% y/y average growth heading into Q3/24 earnings. We continue to believe Celestica is well positioned to capture greater wallet share as part of these increased investments in data center build-outs, giving us confidence management's initial 2025E guidance could be conservative.
SHOP ($78.21, Hold) read-through: SLIGHTLY POSITIVE. While Amazon's management pointed to a consumer that remains price conscious, early indication into the 2024 holiday shopping season point to a strong start. Online net sales at Amazon accelerated to ~8% y/ y in cc, up from ~6% last quarter. We expect healthy levels of consumer spend to reflect positively on Shopify's GMV, which grew ~22% y/y in Q2/24, with a similar level of growth expected in Q3.
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