CLS vs. PINS: Which Stock Has More Upside Potential Now?

Celestica Inc. CLS and Pinterest, Inc. PINS are two major players in the technology sector with key expertise in their respective domains. Celestica is one of the largest firms in the electronics manufacturing services (EMS) industry, primarily serving original equipment manufacturers, cloud-based and other service providers and business enterprises across several industries. It offers a comprehensive range of manufacturing and supply-chain solutions that support various customer requirements, from low-volume, high-complexity custom products to high-volume commodity products.

Pinterest provides a platform to show its users (called Pinners) visual recommendations (called Pins) based on their tastes and interests. Users then save and organize these recommendations into collections (called Boards). Pinterest generates revenue by delivering ads on its website and mobile application. The company is helping advertisers reach millennials and Gen Z audiences who are more active on immersive mobile platforms.

Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the broader industry.

The Case for Celestica

With more than two decades of experience in manufacturing, backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The growing proliferation of AI-based applications and generative AI tools is fueling solid AI investments across the technology ecosystem. This, in turn, is driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, data center interconnects, edge solutions and servers and storage-related products.

Celestica’s focus on product diversification and increasing its presence in high-value markets is positive. Its strong research and development foundations allow it to produce high-volume electronic goods and highly complex technology infrastructure products for a wide range of industries, including communication, healthcare, aerospace and defense, energy, semiconductor and various cloud-based and other service providers. Such a diverse customer base enhances business resilience by reducing dependence on a single industry and minimizing the effects on financial results from an economic downturn in a specific sector.

However, the company remains plagued by margin woes. Celestica’s products are highly sophisticated and typically based on the latest technological innovations, which have historically led to high research and development costs. High operating expenses have contracted margins. Moreover, Celestica faces stiff competition from industry giants like Foxconn, Flex and Sanmina Corporation SANM. The highly cyclical nature of the semiconductor industry remains an overhang, particularly in the aftermath of the tariff war.

The Case for Pinterest

Pinterest is increasingly establishing a unique value proposition for advertisers that could provide a competitive advantage in the long run. Through various innovations, it continues to dramatically improve the advertising platform, which appears to be one of the best ad platforms for consumer discretionary brands seeking new ways to reach customers and stretch smaller ad budgets. Pinterest’s Verified Merchants Program allows brands to create a catalog of shoppable products on the app and use special retargeting capabilities in their ads.

The company’s focus on improving operational rigor and incorporating sophisticated AI (artificial intelligence) models to enhance relevancy and personalization is likely to bring long-term benefits. Pinterest is also emphasizing building new ad tools and formats to help grow the scope of monetization on the platform. This will enable advertisers to measure the results and conversion rates, which will improve their decision-making. It has partnered with Amazon.com, Inc. AMZN to further capitalize on the commercial intent of its user base and increase shoppability on its platform. The buyout of the AI-powered, high-tech fashion-shopping platform, The Yes, has enabled it to create a strategic organization to help steer the evolution of its features and merchants.

However, Pinterest expects operating expenses to increase substantially in the near term as it expands operations domestically and internationally, enhancing product offerings, broadening user and advertiser base, expanding marketing channels, hiring additional employees and developing technology. Increased infrastructure spending related to user and engagement growth is likely to result in higher costs of revenue. In addition, Pinterest faces significant competition from larger, more established companies and smaller firms, which offer users engaging content and commerce opportunities through similar technology, products and services.

How Do Zacks Estimates Compare for CLS & PINS?

The Zacks Consensus Estimate for Celestica’s 2025 sales and EPS implies year-over-year growth of 26.3% and 52.1%, respectively. The EPS estimates have been trending northward (up 6.3%) over the past 60 days.

The Zacks Consensus Estimate for Pinterest’s 2025 sales implies year-over-year growth of 16.1%, and that of EPS suggests an increase of 27.1%. The EPS estimates have been trending southward (down 8.9%) over the past 60 days.

Price Performance & Valuation of CLS & PINS

Over the past year, Celestica has gained 227.2% compared with the industry’s growth of 91.6%. Pinterest has declined 18.2% over the same period.

Celestica looks more attractive than Pinterest from a valuation standpoint. Going by the price/sales ratio, Pinterest’s shares currently trade at 3.54 forward sales, higher than 2.06 for Celestica.

CLS or PINS: Which is a Better Pick?

While Celestica sports a Zacks Rank #1 (Strong Buy), Pinterest has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both Celestica and Pinterest expect sales and earnings to improve in 2025. Celestica has shown sharp revenue and EPS growth over the years, while Pinterest has exhibited linear growth. Celestica boasts a better price performance with comparatively more attractive valuation metrics. With a superior Zacks Rank, Celestica seems to be a better investment option at the moment in the match-up between two contrasting players.

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This article originally published on Zacks Investment Research (zacks.com).

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