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Credo Technology Surges 144% in 3 Months: Is the Stock Still a Buy?
ZACKSยท 2025-07-09 14:15
Core Insights - Credo Technology Group Holding Ltd (CRDO) has experienced a significant stock appreciation of 144.2% over the past three months, driven by AI proliferation and demand for energy-efficient connectivity solutions, with shares trading near a 52-week high of $95.71 [1][10] - The company is expected to continue its growth trajectory, projecting revenues to surpass $800 million in fiscal 2026, indicating over 85% year-over-year growth [12][10] Group 1: Business Performance - CRDO's Active Electrical Cables (AEC) product line has shown double-digit sequential growth in fiscal Q4 2025, gaining traction in the data center market [3] - The AECs offer over 100 times improved reliability compared to laser-based optical solutions, making them increasingly attractive for data center applications [4] - The optical business, particularly Optical Digital Signal Processors (DSPs), has also been a key growth driver, achieving revenue targets and expanding customer diversity [5] - CRDO's revenues for fiscal 2025 reached $436.8 million, a 126% year-over-year increase, with Q4 revenues surging 179.7% year-over-year to $170 million [9] Group 2: Product Innovations - CRDO's 3-nanometer 200-gig-per-lane optical DSP is expected to facilitate the industry's transition to higher lane speeds [6] - The PCIe retimers and Ethernet retimers business is witnessing robust performance, particularly in AI server applications, driven by demand for 50 gig and 100 gig per lane Ethernet solutions [7][8] Group 3: Financial Outlook - For Q1 fiscal 2026, CRDO expects revenues between $185 million and $195 million, reflecting a 12% sequential increase at the midpoint, with a projected non-GAAP gross margin of 64-66% [12] - The company anticipates non-GAAP net margin to approach nearly 40% due to operating expenses growing at less than half the revenue growth rate [12] Group 4: Market Position - CRDO's stock performance has outpaced peers like Broadcom, Marvell, and Cirrus Logic, which gained 57.9%, 36.2%, and 26.9% respectively [15][20] - The company is trading at a forward 12-month Price/Sales ratio of 18.96, significantly higher than the sector average of 8.60 [21] Group 5: Investment Recommendation - Given the strong fundamentals and positive market outlook, CRDO is positioned as a strong buy, with rising investor confidence and a differentiated product offering [23][24]