We came across a bullish thesis on Credo Technology Group Holding Ltd (CRDO) on Substack by Oliver | MMMT Wealth. In this article, we will summarize the bulls’ thesis on CRDO. Credo Technology Group Holding Ltd (CRDO)’s share was trading at $58.79 as of Jan 29th. CRDO’s forward P/E was 63.69 according to Yahoo Finance.
A technician wearing protective glasses installing optical fibers and cables.
Credo Technology Group (CRDO) offers innovative hardware solutions aimed at optimizing large data centers and AI systems by improving energy efficiency and reducing operational costs. The company provides a range of cutting-edge products that include HiWireActive Electrical Cables (AECs), which offer faster and more efficient connectivity for servers compared to traditional cables, and Pluggable Patch Panels (P3), which streamline network management by enabling easier system upgrades and maintenance. Their optical devices enable high-speed, energy-efficient data transmission using light, ideal for hyperscale applications in AI and 5G environments. Additionally, CRDO’s PCI Express & CXL Retimers ensure strong signal integrity over long distances, while their Serdes IP & Chiplets help convert data between serial and parallel formats. Their line card solutions help ensure efficient data flow across networks, further enhancing the company’s technology offerings.
The company is experiencing robust growth, with a 64% increase in revenue to $72 million in the last quarter. Looking ahead, CRDO expects to achieve $115-$125 million in revenue next quarter, a projected growth rate of 67%. Despite this impressive revenue increase, the company is still operating at a net income margin of -5.9% but boasts a strong gross margin of 63.2%. Notably, their non-GAAP net income per share has grown from $0.01 to $0.07 year-over-year. With $383 million in cash and cash equivalents, CRDO is well-capitalized to continue investing in its growth initiatives.
CRDO stands out as a compelling investment opportunity, aligning with key macro trends such as the growth of AI, increased demand for data connectivity, and the push for energy efficiency. The company’s products are already being used by high-profile clients such as Tesla, Amazon, and Microsoft, which validates the quality and relevance of their offerings. Furthermore, CRDO’s technology significantly reduces space requirements by 75% compared to copper-based solutions, while also enhancing power efficiency by 50%. As AI demand continues to surge, the need for efficient backend technologies like CRDO’s is expected to grow substantially, positioning the company for continued success.
The company is at an inflection point, with surging demand and an expected near-term achievement of GAAP profitability, which would mark a significant milestone. Despite its impressive growth prospects, CRDO is trading at just 0.69x PEG and an EV/Sales ratio of 17.2x, which is favorable when compared to competitors like Marvell Technology (MRVL), which trades at 8x PEG. This makes CRDO a potentially undervalued opportunity for investors looking to capitalize on the growth of AI and next-generation connectivity.
Credo Technology Group Holding Ltd (CRDO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held CRDO at the end of the third quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of CRDO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRDO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.