Credo Surges 284% in a Year: Is the Stock a Screaming Buy in 2025?

Credo Technology Group (CRDO Quick QuoteCRDO – Free Report) shares have gained 284.1% in the trailing 12 months, outperforming the broader Zacks Computer & Technology sector’s return of 33.5% and the Zacks Electronics Semiconductors’ industry’s appreciation of 67.4%. 

This high-speed and power-efficient connectivity solutions provider is benefiting from exponential increase in demand for bandwidth driven by the accelerating deployment of leading-edge AI infrastructure and applications.

Credo’s strong clientele is positive. Its solutions are used by all the major hyperscalers, and includes more than 20 blue chip clients, including over 10 original equipment manufacturers and original design manufacturers, over 10 optical module manufacturers and other leading enterprises.

One Year Performance

 

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These factors have helped CRDO outperform broader sector peers, including Broadcom (AVGO Quick QuoteAVGO – Free Report) , Marvell Technology (MRVL Quick QuoteMRVL – Free Report) and Synopsys (SNPS Quick QuoteSNPS – Free Report) , over the same timeframe. AVGO and MRVL shares have returned 116.4% and 84.4%, respectively, while SNPS dropped 1.2%.

Strong Portfolio Aid CRDO’s Prospects

Credo’s strong portfolio is helping it address the growing need of rack scale interconnectivity densities in the AI and machine learning (ML) infrastructure. CRDO’s Ethernet solutions help multiple physical devices to work on growing sizes of AI/ML model at high speed and low latency. 

Its Ethernet solutions offering includes active electrical cables, optical Digital Signal Processor (DSPs), line card retimers, SerDes chiplets and SerDes IP licenses for port speeds ranging from 100 G (Gigabits per second) up to 1.6 terabits per second. 

Credo’s Active Electrical Cables (AECs) helps in maintaining signal integrity and optimizing power efficiency that helps in delivering unparalleled reliability as data speeds continue to increase. In second-quarter fiscal 2025, AEC’s record revenues were driven by strong demand from its two top customers and an emerging hyperscaler.

AECs work better than laser-based optics, offering lower power, reduced cost and greater reliability. Its latest 800G ZeroFlaps AECs for AI back-end networks support lengths of up to 7 meters. 

CRDO’s DSP solutions are benefiting from strong demand for 50G and 100 G per lane solutions, including AOCs and transceivers, supporting port speeds from 100G to 800 G. Credo expects strong potential for its 200G per lane solution.

Credo’s line card retimers are benefiting from strong demand for 400G and 800G applications. It continues to see growth opportunities as line card retimers are getting adopted for scale app networks in AI appliances and for 100G per lane switching applications.

Credo’s Outlook Strong

Credo expects third-quarter fiscal 2025 revenues between $115 million and $125 million, which indicates growth of 67% sequentially at mid-point.

CRDO expects double-digit sequential revenue growth from third-quarter fiscal 2025 to fourth-quarter fiscal 2025. For fiscal 2025, revenues are expected to grow more than 100%.

Simultaneously, management expects operating expenses to grow at less than half the rate of revenues, thereby driving margin expansion.

Over the long term, Credo expects non-GAAP gross margin between 63% and 65% or non-GAAP operating margin of 30-35% range.

CRDO’s Earnings Estimates Trend Higher

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $120 million, indicating year-over-year growth of 126.16%. 

The consensus mark for earnings is pegged at 18 cents per share, up 80% over the past 60 days and indicates 350% growth over the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $386.95 million, indicating year-over-year growth of 100.52%. 

The consensus mark for fiscal 2025 earnings is pegged at 50 cents per share, up 43% over the past 60 days and indicates 455.56% growth over fiscal 2024’s reported figure.

CRDO’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, matching in the remaining one, the average surprise being 28.33%.
 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Here’s Why Credo is a Buy

Credo is trading at a premium, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales, CRDO is trading at 23.24X, higher than the sector’s 6.98X.

Price/Sales (F12M)

 

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CRDO shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

 

CRDO Trades Above 50-day and 200-day SMA

 

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Credo’s strong portfolio is a major driver and justifies a premium valuation.

Credo currently carries a Zacks Rank #2 (Buy), which indicates that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.