Credo Technology Hits ‘Inflection Point,’ Stock Eyes Record High on Earnings Beat: Retail’s Plugged In
By Stocktwits Inc | First Published Dec 3, 2024, 7:41 PM ISTCEO William Brennan stated the company reached its 'inflection point' earlier than estimated, with stronger-than-expected momentum.
Shares of Credo Technology Group Holding ($CRDO) climbed more than 34% pre-market Tuesday after the company’s second-quarter earnings topped expectations, driven by growth in product sales.
The stock, which dipped over 2% on Monday before the earnings release, has more than doubled in value year-to-date. If pre-market gains hold, Credo could open at a new all-time high.
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The provider of high-speed semiconductor solutions reported earnings of $0.07 per share, exceeding the expected $0.04. Revenue came in at $72 million, registering a 64% year-over-year (YoY) increase, beating the $66.50 million forecast, according to data from finchat.io.
“We marked record revenue across our three main product lines and began to see the uptick in shipments that marks the beginning of the revenue inflection point we've discussed in past quarters,” said CEO William Brennan during the earnings call.
Brennan described the company’s "inflection point" as the revenue trajectory shifting from moderate growth to accelerated gains, fueled by stronger-than-expected demand, particularly from AI deployments, and deepening customer partnerships. For several quarters, the company had forecasted this turning point would occur in the second half of fiscal 2025.
The company’s product business generated $69.1 million of revenue in Q2, up 88% compared to the previous year.
The company’s three core product lines—active electrical cables (AECs), optical digital signal processing (DSP), and line card retimes—grew double digits sequentially to achieve record revenue levels. However, the exact figures were not disclosed.
Brenna also highlighted that Microsoft (MSFT) and an undisclosed emerging hyperscaler contributed 10% of the revenue each but hinted, “We've been doing a lot of good work with xAI specifically in the ZeroFlap category.”
Meanwhile, Amazon (AMZN) was their biggest client accounting for 33% of the company’s revenue.
For the third quarter, the company projects revenue between $115 million and $125 million.
Credo is betting on expansion in the data center ecosystem and AI applications to drive more AEC and DSP sales in the coming quarters. “The main driver in FY '26 based on the market size will be AECs,” said Brennan
Retail sentiment around the stock surged to an annual high of ‘extremely bullish’ (94/100) along with chatter peaking in the ‘extremely high’ (97/100) territory.
Retail investors on Stocktwits are viewing Credo as a potential long-term play.
Bank of America (BofA) has double upgraded the stock to ‘Buy’ from ‘Underperform’ and more-than-doubled its price target to $80 from $27 on Credo hitting its ‘inflection point’.
“Credo is translating sales growth to a better earnings growth model, and its outlook suggests the start of a multi-year adoption cycle for its Active Electrical Cable product that enables power-efficient artificial intelligence clusters,” the brokerage said in a research note.
Barclays also doubled its price target on Credo to $80 from $32, keeping an ‘Overweight’ rating on the stock. “An AEC inflection has finally been reached,” it said.
Stifel increased its price target on the stock to $75 from $50, citing the company’s strong guidance " demonstrating hyperscalers’ clear preference” for Credo’s products. The brokerage expects Credo to retain its AEC market leadership “for the foreseeable future.”
Roth MKM boosted its price target for the stock from $45 to $80, while Needham raised its target from $43 to $70, both maintaining a ‘Buy’ rating.
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