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On Monday, Mizuho (NYSE:MFG) Securities demonstrated its continued confidence in Credo Technology Group Holding Ltd. (NASDAQ: NASDAQ:CRDO) by raising its price target from $41.00 to $49.00. The firm has maintained its Outperform rating on the stock.
The adjustment in the price target comes after Mizuho's analysis of Credo Technology's financial projections. The firm's estimates for Credo's October quarter revenue and earnings per share (EPS) remain unchanged at $66.5 million and $0.05, respectively, aligning with consensus estimates.
However, looking forward, Mizuho has increased its Fiscal Year 2025 (F25E) revenue and EPS estimates from the previous $320 million and $0.38 to $322 million and $0.41, surpassing consensus projections of $316 million and $0.34.
The upward trend continues with Mizuho's Fiscal Year 2026 (F26E) estimates, which have been revised from $496 million and $0.85 to $510 million and $0.91. This revision stands above the consensus estimates of $496 million in revenue and $0.77 in EPS. Additionally, Mizuho has introduced its Fiscal Year 2027 (F27E) estimates for Credo Technology, projecting revenues of $675 million and EPS of $1.25, which is also above the consensus of $666 million and $1.17.
The rationale behind the optimistic outlook is attributed to the strong performance expected from Amazon (NASDAQ:AMZN) Web Services (AWS) ramps, which are anticipated to drive significant upside. Furthermore, Microsoft (NASDAQ:MSFT) is expected to continue its growth trajectory, and a third hyperscaler, which Mizuho believes to be Google (NASDAQ:GOOGL), is projected to start contributing revenues to Credo Technology's financials. The price target is set at 19.5 times the F26E Price/Sales (P/S) ratio.
In other recent news, Credo Technology Group Holding Ltd. has experienced a series of significant developments. The company's shareholders recently approved key proposals during its 2024 Annual General Meeting, including the election of three Class III directors and the ratification of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending May 3, 2025.
Credo Technology also unveiled its 800G ZeroFlap family of HiWire Active Electrical Cables, designed to support artificial intelligence backend networks with enhanced reliability and signal integrity. The launch is part of the company's strategy to address the growing demand for higher bandwidth and energy efficiency in data infrastructure.
Financially, Credo Technology reported robust Q1 2025 results, with revenues reaching $59.7 million and a non-GAAP gross margin of 62.9%, marking a substantial year-over-year revenue increase of 70%. This strong performance was primarily driven by expanding AI deployments.
Analysts at TD Cowen, Craig-Hallum, and Needham have all maintained a Buy rating for Credo Technology, with TD Cowen setting a price target of $40, Craig-Hallum raising the price target to $38, and Needham upping it to $33.
These firms have expressed optimism about the company's potential for diversified revenue streams, as evidenced by broadening engagement across its product portfolio, including Application-Specific Integrated Circuits (ASICs) and Optical Digital Signal Processors (DSPs). They anticipate a revenue inflection in the second half of fiscal year 2025, driven by accelerating ASIC revenue from multiple hyperscaler customers.
InvestingPro Insights
Credo Technology Group Holding Ltd. (NASDAQ: CRDO) has been making waves in the market, and recent data from InvestingPro adds depth to Mizuho's bullish outlook. The company's impressive revenue growth of 70.15% in the most recent quarter aligns with Mizuho's optimistic projections for future fiscal years. This growth trajectory is further supported by an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
Despite not being profitable over the last twelve months, another InvestingPro Tip suggests that net income is expected to grow this year, which corroborates Mizuho's increased EPS estimates. The company's gross profit margin of 62.47% is noteworthy, with InvestingPro highlighting it as an "impressive gross profit margin."
Investors should note that CRDO's stock has shown significant momentum, with a 110.48% price return over the last six months. This performance reflects the market's growing confidence in Credo's potential, particularly with the expected AWS ramps and contributions from major tech players like Microsoft and potentially Google.
For those seeking a more comprehensive analysis, InvestingPro offers 16 additional tips on CRDO, providing a broader perspective on the company's financial health and market position.
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