QV Alert – Buy Credo Technology Ahead Of Earnings

Explosive growth positions Credo for rapid share price progress.

There’s a lot of bad news circling pertaining to the potential impact of DeepSeek (DEEPSEEK) to disrupt hyperscaler’s infrastructure demand. But beyond this narrative, I make the case that there’s yet another narrative bubbling on the surface that will start to unfold in the coming months.

As succinctly as possible, this is my argument, none of the tech titans are showing any near-term slowdown in capex spending. In fact, there’s an ecosystem in place that favors high capex spend, and on that outcome, CRDO is very well positioned. This narrative will pick up in the coming months.

Moreover, I believe that CRDO is going to grow at +50pc y/y over the coming quarters and that paying 47x forward EPS for CRDO provides a terrific risk-reward.

Here’s why I see a path to a $105 per share price target.

Credo makes Ethernet connectivity products that help networks communicate faster and more efficiently. Think of things like cables and other tech products that keep Internet connections and data centers running smoothly; particularly in high-intensity and demanding environments that run AI tasks.

Their gear is built to handle lightning-fast data transfers. They focus on solving common issues in high-power usage, offering faster, and more reliable solutions.

Simply put, Credo’s products tackle problems that matter most in tech-heavy environments, like data centers, where reliable, high-speed connections are crucial. This helps customers maintain smooth operations and get a good return on investment.

What’s more, on the back of Microsoft’s (MSFT), Meta Platforms’ (META), and Alphabet’s (GOOG) earnings calls, we can now be more confident that these tech titans are going to continue to invest massive sums into their capex infrastructure.

As an Inflection investor, I like that Credo Technology holds no debt. What’s more, it has around $380m of cash and marketable securities, which will support its growth prospects.

Seeking Alpha, 5 February 2025, Michael Wiggins De Oliveira

I like this idea of being an inflection investor. What a perfect time to buy a share; when it is hitting an inflection point in its growth curve.

In the second quarter, Credo generated revenue of $72m, up 21pc sequentially and up 64pc year-over-year. Q2 non-GAAP gross margin was 63.6pc. The second quarter was our most successful to date. 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.

Q2 showcased outstanding execution marked by record revenues, continued innovation and increased customer traction. We are seeing the anticipated revenue inflection point in second half fiscal ’25, and we are seeing even greater momentum than initially projected. With demand fueled by AI deployments and deepening customer relationships, Credo is well positioned for sustained growth and increasing profitability.

Bill Brennan, CEO, Credo Technologies, Q2 2025, 2 December 2024

Share Recommendations (6 February 2025)

Credo Technologies CRDO Latest price: $80

The chart is a classic. Three years sideways, a breakout, a small step and then kaboom! Off to the races. There is no telling where these shares are heading but there are excellent odds that their destination is much higher.