Credo Technology Group is the IBD Stock Of The Day as shares rebound off their 21-day exponential moving average.
A supplier of high-speed connectivity products for internet data centers, Credo in January pulled off one of this year's rare technology initial public offerings. Credo's products help speed up communications among racks of computer servers and storage devices packed into data centers.
Credo's products also are built into 5G wireless infrastructure equipment. Its biggest customers are big technology companies that operate so-called "hyperscale" data centers. They're designed to ratchet up computing horsepower when demand surges.
Stifel initiated coverage of Credo in February.
In a note to clients, Stifel analyst Tore Svanberg said: "Credo is in the early innings of a large and fast-growing market opportunity, driven by multiple product ramps, including its SerDes (serializer/deserializer 'chiplets'), optical digital signal processors, line-card physical layer devices, and 'Hi-Wire' active electrical cables."
Copper Interconnect Cables A Growth Driver
Credo's copper interconnect cables operate at 100 gigabytes per second, 200G, 400G, and 800G speeds.
The active cabling targets the deployment of next-generation server platforms coming from Advanced Micro Devices and Intel.
Craig-Hallum analyst Richard Shannon says Microsoft is Credo's initial customer for the active electrical cables.
"Recent market research suggests (active electrical cable) adoption on a per-server level could approach 75% in a few years, suggesting strong growth potential for many years," Shannon said in his note to clients.
CRDO Stock: Next-Generation Data Center Bandwidth
Mizuho Securities expects Credo to take market share.
"Credo's (cables) drive 50% to 70% lower switch/cable power consumption, 50% lower silicon footprint, and compact cabling with tight bend radius enabling greater rack density," Mizuho analyst Vijay Rakesh said in a note.
In fiscal 2023, Credo has targeted revenue of $200 million, up 88%.
In a September report, Goldman Sachs analyst Toshiya Hari said: "Despite the increasingly uncertain macroeconomic backdrop and a more challenging cloud capital spending outlook, we continue to believe that Credo's strategic role in enabling next-generation bandwidth needs in a cost- and power-effective envelope as well as the company's idiosyncratic design wins will support a robust growth trajectory."
CRDO Earnings Due Wednesday
Fiscal second-quarter earnings for CRDO stock are due Nov. 30. Investors may want to be cautious ahead of the earnings report. One strategy around earnings would use call options.
From a technical view, CRDO stock has formed a cup-with-handle base. Credo stock trades about 9% below an entry point of 15.51.
In addition, Credo stock has rebounded off its 21-day exponential moving average. That chart line is an alternative to 10-day and 50-day moving averages.
CRDO stock has gained about 40% in 2022, outperforming the S&P 500, which is down nearly 17%. On the stock market today, CRDO stock dipped 1.9% to 14.13.
Two veterans of Marvell Technology, Lawrence Cheng and Job Lam, founded the San Jose, Calif.-based company in 2008. Bill Brennan, president and chief executive, joined the company in 2014.
Credo IPO Raises $200 Million
In January, the Credo IPO raised $200 million with shares initially priced at 10. The company downsized its offering to 20 million from 25 million shares.
Still, tech IPOs have been rare in 2022. Amid volatility on the Nasdaq composite, Credo stock hit a low of 8.61 on May 12.
CRDO stock belongs to IBD's Internet-Network Solutions industry group, which ranks only No. 171 out of 197 groups.
Meanwhile, the Relative Strength Rating of CRDO stock is 90 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
The company holds an IBD Composite Rating of 80. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
CRDO Stock: Institutional Ownership
CRDO stock owns an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Credo uses contract manufacturers in Vietnam and Malaysia. Rivals include Marvell and Broadcom.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
