Credo (CRDO) crashes on massive guidance cut, prompts several downgrades

Credo Technology Group (NASDAQ: CRDO) shares are trading more than 40% lower in pre-market Wednesday trading after the company pre-announced a disappointing revenue forecast.

Credo said its largest customer has reduced its demand forecast for certain Credo products. As a result, the company now sees revenue for its fiscal fourth quarter to come in the range of $30-32 million. The analyst consensus stood at $58.3M.

“Credo expects revenue for the full fiscal year ending April 27, 2024 will be flat compared to the full fiscal year ending April 29, 2023. From a projected low point in Q4 FY23 or Q1 FY24, Credo expects to see sequential growth during FY24. Credo’s long-term financial model remains unchanged,” the company said in a filing.

At least two brokers cut their recommendation on the CRDO stock. Cowen downgraded to Market Perform from Outperform and said it will take time for the company to shore up momentum.

Stifel analyst Tore Svanberg cut the price target to $14 per share from the prior $19. However, he maintained a Buy rating on the stock.

“As the “last man standing” amidst the industry-wide correction, we believe the impact on CRDO appears disproportionate due to the high customer concentration. However, fundamentals remain intact, w/ LT demand trends potentially even accelerating (“AI wars” driving AEC adoption). We still project CRDO to grow at a 35%+ 3-yr. CAGR (CY20-CY23E), even as CY24E growth could materially re-accelerating following this industry-wide correction,” Svanberg wrote in a client note.

Needham & Company analyst Quinn Bolton believes the after-hours selloff is overdone.

"Management emphasized that hyperscalers aren't immune to the weakening macro and has taken a conservative cut to the rest of its hyperscale forecast. In our opinion, the sell-off is overdone and we would be buyers on weakness," Bolton said.

By Senad Karaahmetovic

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