BofA raises Credo Technology stock price target to $165 on AI growth

Investing.com - BofA Securities has increased its price target on Credo Technology Group Holding Ltd (NASDAQ:CRDO) to $165.00 from $120.00, while maintaining a Buy rating on the stock. The company, currently valued at $21.5 billion, has seen its stock surge nearly 300% over the past year, according to InvestingPro data.

The firm cited Credo’s active electrical cables (AEC) as delivering "the sweet spot of high-speed and low-cost/low-power connectivity in AI clusters" as a key factor in the decision. BofA positioned Credo as one of its top four AI-leveraged stocks, alongside NVIDIA, Broadcom, and AMD. The company’s impressive revenue growth of 126% year-over-year supports this positioning, though InvestingPro analysis indicates the stock is currently trading above its Fair Value.

BofA noted Credo’s expanding customer diversification, with the addition of a fourth hyperscaler beyond Amazon, xAI, and Microsoft, and a fifth customer reportedly on the way. The company is also working on expanding its pipeline to include optical technologies. With a strong gross profit margin of 65% and minimal debt, as revealed by InvestingPro’s comprehensive analysis, Credo appears well-positioned for continued expansion.

The research firm projects Credo’s core business could sustain 25-30% growth rates over the next few years, driving per-share earnings toward $3+ by calendar year 2027. BofA suggests potential upside to $5 per share if sales grow at a 50% annual pace as the AEC market doubles to over $2 billion and new pipeline additions contribute another $500 million.

BofA raised its fiscal year 2026/2027/2028 earnings estimates by 30-40%, maintaining its price target calculation based on 70x calendar year 2026 price-to-earnings ratio, which represents approximately 2x PEG ratio, at the higher end of the firm’s 1-2x range.

In other recent news, Credo Technology Group Holding Ltd reported impressive financial results for the first quarter of its fiscal year 2026. The company posted earnings per share (EPS) of $0.52, significantly exceeding analyst expectations of $0.35. This represents a surprise of 48.57%. Credo Technology’s revenue also surpassed forecasts, reaching $223.1 million compared to the anticipated $190.63 million. These results highlight a strong start to the fiscal year for Credo Technology. Additionally, the company’s performance has garnered attention from analysts, although specific upgrades or downgrades were not mentioned in the recent reports. Investors may find these developments noteworthy as they consider the company’s future prospects.

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