Bernstein Names Top Networking Stocks Led by Celestica

Investing.com -- Bernstein has identified top investment opportunities in the U.S. networking and communications equipment sector, with Celestica emerging as the firm's highest-conviction pick among a select group of companies positioned to benefit from data center infrastructure buildouts.

The research firm highlighted three stocks with Outperform ratings, citing growth opportunities in optical modules, switching infrastructure, and artificial intelligence hardware deployment. The analysts provided specific price targets and upside potential for each company based on their assessment of revenue opportunities and earnings power through 2027-2028.

1. Celestica was named Bernstein's top pick and carries brokerage's $520 price target, implying 46% upside. The firm said consensus estimates understate revenue opportunities from Google TPU, OpenAI Jalapeno, AMD Helios and 1.6-terabit switching programs. Bernstein estimates these programs could generate about $25 billion in incremental revenue, including $8 billion from Google TPU, $12 billion from OpenAI Jalapeno and $5 billion to $6 billion from AMD Helios and broader 1.6T switching.

Bernstein expects Celestica could guide to roughly $20 billion in year-over-year growth in its Communications and Connectivity Solutions business, compared with consensus expectations of about $15 billion in growth for the company overall. The firm sees the company's Oct. 27 analyst day as a potential catalyst and values the stock at 22 times its estimated $24 in fiscal 2027 earnings per share.

2. Lumentum was rated Outperform with a $1,220 price target, offering 32% upside. Bernstein maintains a positive view on the optical module industry, seeing continued upside to transceiver pricing and revenues as data center switches move to higher speeds. The firm believes Lumentum can maintain its share of industry economics despite the push for CW-laser based transceivers, and expects significant operating leverage amid growth. Bernstein prefers Lumentum over Coherent given its purer exposure and higher incremental margins, applying a 35x multiple to $35 in fiscal year 2028 earnings per share.

3. Coherent also received an Outperform rating and a $350 price target, representing 24% upside. Bernstein expects Coherent to benefit from the same favorable optical module trends, including increasing demand as data center switches migrate to higher speeds. The firm values the company at 22 times its estimated $16 in 2028 earnings per share.

4. Ciena was also rated Outperform, with a $440 price target implying 28% upside. Bernstein acknowledged near-term supply constraints but said the stock's valuation remains undemanding. The firm expects availability of key components, including ceramic packaging, pump lasers and memory, to improve beyond 2027, supporting stronger growth.

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