Last Update01 Aug 25Fair value Increased 9.14%
Credo Technology Group Holding's consensus price target has been revised upward, reflecting analyst optimism around accelerating EPS growth, expanding AI-driven market opportunities, and industry tailwinds supporting the company's differentiated high-speed connectivity solutions, resulting in a new target of $99.67.
Analyst Commentary
- Bullish analysts see increased EPS power potential, projecting approximately $3 by CY27 and more than $7 longer-term, driven by a larger total addressable market (TAM) in Architecture, Engineering, and Construction, which is significantly above consensus estimates.
- Recent improvements in sentiment and sector re-rating across datacenter and AI server markets contributed to positive price target revisions.
- Ongoing industry tailwinds from AI proliferation are fueling demand for high-speed connectivity, which benefits Credo Technology's market positioning and growth prospects.
- Credo's intellectual property and innovation in low-power, high-speed connectivity solutions uniquely position the company to capitalize on rapidly growing networking opportunities in both back- and front-end AI datacenter infrastructure.
- Analysts believe Credo’s growth trajectory is still in the early stages, highlighting substantial remaining runway and diversification potential as key drivers for continued price target increases.
What's in the News
- Credo Technology expects fiscal year 2026 revenue to exceed $800 million, representing over 85% year-over-year growth.
- Q1 fiscal 2026 revenue is guided between $185 million and $195 million.
- The company launched PILOT, a proprietary platform offering predictive link integrity, advanced diagnostics, and real-time telemetry for data center and cloud infrastructure, aimed at reducing downtime and enhancing reliability.
Valuation Changes
Summary of Valuation Changes for Credo Technology Group Holding
- The Consensus Analyst Price Target has risen from $91.32 to $99.67.
- The Future P/E for Credo Technology Group Holding has risen from 71.96x to 78.60x.
- The Discount Rate for Credo Technology Group Holding remained effectively unchanged, moving only marginally from 9.46% to 9.49%.
Key Takeaways
- Credo's expansion into PCIe products and AEC business will diversify revenue streams and enhance future revenue growth.
- Strategic focus on optical DSP and PCIe retimers positions Credo for long-term growth via energy-efficient solutions and scale-up network opportunities.
- Revenue stability is at risk due to heavy reliance on one customer and few hyperscalers, with challenges in product adoption and market diversification.
Catalysts
About Credo Technology Group Holding- Provides various high-speed connectivity Credo Technology Group Holding Ltd provides various high-speed connectivity solutions for optical and electrical Ethernet applications in the United States, Taiwan, Mainland China, Hong Kong, and internationally.
- Credo is set to expand its TAM significantly with the introduction of PCIe products, which will address a larger connectivity opportunity, impacting future revenue growth.
- The company expects to see continued revenue growth in its AEC business due to new qualifications, customer forecasts, and design engagements with additional hyperscalers, diversifying its revenue base.
- Credo is advancing its optical DSP business with opportunities for 1.6T port deployments, which could boost revenue as the need for energy-efficient optical connectivity grows.
- Credo's successful execution in ramping up operations and delivering innovative solutions is expected to drive operating leverage, increasing future earnings and margins.
- The potential for PCIe retimers in scale-up networks represents a significant long-term revenue opportunity, with the market forecasted to exceed $1 billion by 2027.
Credo Technology Group Holding Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Credo Technology Group Holding's revenue will grow by 33.8% annually over the next 3 years.
- Analysts assume that profit margins will increase from 11.9% today to 30.1% in 3 years time.
- Analysts expect earnings to reach $314.5 million (and earnings per share of $1.75) by about July 2028, up from $52.2 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 72.0x on those 2028 earnings, down from 305.7x today. This future PE is greater than the current PE for the US Semiconductor industry at 30.9x.
- Analysts expect the number of shares outstanding to grow by 3.36% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.46%, as per the Simply Wall St company report.
Credo Technology Group Holding Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- High concentration of revenue from a single customer (86% in Q3) could pose significant risks if the customer reduces orders, impacting revenue stability and margins.
- Dependency on a few major hyperscalers for a significant portion of revenue could lead to volatility if market dynamics shift or competitive pressures increase, affecting overall company earnings.
- The focus on scaling up new products like PCIe AECs and retimers still requires successful market adoption and design wins, which, if delayed or unsuccessful, could hinder revenue growth and profitability.
- The shift from 25-gig to higher lane speeds like 50-gig and 100-gig per lanes may encounter delays in customer adoption, affecting the expected revenue increase from these technologies.
- Any failure to diversify the customer base or expand successfully into new product markets like PCIe could result in stagnant growth, negatively impacting long-term revenue and net margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $91.318 for Credo Technology Group Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $34.13.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.0 billion, earnings will come to $314.5 million, and it would be trading on a PE ratio of 72.0x, assuming you use a discount rate of 9.5%.
- Given the current share price of $92.93, the analyst price target of $91.32 is 1.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.