Credo Technology (CRDO) ZACKS·2025-01-06 17:46Core Viewpoint - Credo Technology Group (CRDO) has experienced significant stock performance, gaining 284.1% over the past year, driven by increasing demand for bandwidth due to AI infrastructure deployment [1][5]. Company Performance - CRDO's stock performance has outpaced the broader Zacks Computer & Technology sector, which returned 33.5%, and the Zacks Electronics Semiconductors industry, which appreciated 67.4% [1]. - The company has a strong portfolio that addresses the growing need for rack scale interconnectivity in AI and machine learning infrastructure [6][19]. Clientele and Market Position - Credo's solutions are utilized by major hyperscalers and include over 20 blue-chip clients, such as original equipment manufacturers and optical module manufacturers [2]. Product Offerings - CRDO's Ethernet solutions support port speeds ranging from 100 G to 1.6 T (terabits) per second, including active electrical cables, optical Digital Signal Processors, line card retimers, and SerDes chiplets [7][10]. - Active Electrical Cables (AECs) have shown record revenues due to strong demand, outperforming laser-based optics in terms of power efficiency and reliability [8][9]. Financial Outlook - For the third quarter of fiscal 2025, CRDO expects revenues between 125 million, indicating a sequential growth of 67% at the midpoint [11]. - The company anticipates over 100% revenue growth for fiscal 2025, with operating expenses expected to grow at less than half the rate of revenues, leading to margin expansion [11][12]. Earnings Estimates - The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is 386.95 million, indicating a year-over-year growth of 100.52% [13]. Valuation and Investment Recommendation - Credo is currently trading at a premium with a forward Price/Sales ratio of 23.24X, significantly higher than the sector's 6.98X [16]. - The company holds a Zacks Rank 2 (Buy), suggesting that investors should consider accumulating the stock [19].