Mon. Oct 3rd, 2022

Data infrastructure networking solutions and licenses provider Credo Technology (NASDAQ: CRDO) stock is only down a merciful (-3%) for the year. It’s worth noting that the fabless semiconductor company only recently IPO’ed in January of 2022 but shares have been resilient due to its strong 90% top-line growth. As a supplier of high-speed connectivity solutions to the data infrastructure market, optimism in the seemingly recession-proof data infrastructure segment is strong. However, the technology bear market has caused investors to choose value and profits over growth and momentum. The Company was able to navigate the supply chain as one its partners in China was shut down during the COVID lockdowns limiting its ability to address customer demand in fiscal Q4 2022. Despite the challenge, many of its larger customers have affirmed backlog that extends 52 weeks. The Company continues to see increasing demand of its solutions from optical module manufacturers, hyperscalers to networking OEMs and ODMs. Credo raised its forward top-line guidance and expects to nearly double its revenues north of $200 million in fiscal 2023. Prudent investors looking for a growth play in the data infrastructure segment can watch for opportunistic pullbacks in shares of Credo Technology.



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Q4 Fiscal 2022 Earnings Release

On June 1, 2022, Credo reported its fiscal Q4 2022 results for the quarter ending April 2022. The Company reported earnings-per-share (EPS) of $0.02 versus consensus analyst estimates for breakeven, a $0.02 beat. Revenues rose 90% year-over-year (YoY) to $37.53 million, beating analyst estimates for $36.35 million. GAAP gross margins were 63.3% and operating expenses were $30.1 million. GAAP net loss was (-$5.4 million) while non-GAAP net incomes was $2.8 million. The Company sold an additional three million common shares in connection with its IPO for $28.1 million in proceeds. The Company ended the quarter with $259.3 million in cash. Credo CEO Chuck Bill Brennan commented, “Fiscal 2022 was a year of tremendous achievement for Credo. Our highlights included completing our initial public offering in January 2022 and achieving record revenue of $106.5 million, up more than 80% from prior year. We also delivered record results in the most recent quarter, despite the complexities we faced. During our fiscal fourth quarter, we recorded revenue of $37.5 million, a 90.0% increase year over year. We had growth in every of part of our business in fiscal 2022, and we expect the same in fiscal 2023.”

Upside Guidance

Credo issued Upside fiscal Q1 2023 revenue guidance for $43.5 million to $47.5 million versus $42.85 million consensus analyst estimates. GAAP gross margin is expected between 58.5% to 60.5%. GAAP operating expenses are expected between $27.5 million to $29.5 million.

Conference Call Takeaways

CEO Brennan stated he was optimistic towards continuing its strong growth into fiscal 2023. The January 27, 2022, IPO provided ample cash to support investments to improve its products. He reviewed the successful fiscal 2022 with $106.5 million record revenues, up 80% YoY. Product growth rose 120% from prior year. Record top line growth in all its Ethernet lines including optical DSPs, Line Card PHYs, AECs, and SerDes Chiplets as well as its IP licensing business. The Company sets itself apart due to its architectural approach that optimize analog and DSP architectures to deliver low-power and small die sizes. Its development and wafer cost advantages are derived from its N minus one process mode approach. This provide a cumulative effect of value across the entire range of connectivity applications. The total addressable market (TAM) in the high end Ethernet Connectivity market exceeds $5 billion but its new emerging solutions for the USD and PCle segment will add an incremental $3 billion to the TAM. He concluded, “Fortunately, customer demand for our solutions continues to look very robust. We had growth in every part of our business in fiscal 2022 and we expect the same in fiscal 2023. Given the breadth of our solutions, our technical innovation, our operational capabilities, the favorable market trends, and ultimately, the strong demand from customers, we look forward to another record-setting year in fiscal 2023, where we expect to achieve at least $200 million in revenue, which would represent growth of more than 88%.”

Credo Technology Stock is Rebounding

CRDO Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily frames provides a precision view of the landscape for CRDO stock. The weekly rifle chart peaked near the $17.92 Fibonacci (fib) level before collapsing in half to $8.61 before staging a rally. The weekly rifle chart uptrend got rug pulled as shares abruptly collapsed back under its 5-period moving average (MA) at $12.38 and 15-period MA at $11.93. The weekly stochastic is still rising but starting to stall under the 50-band. The daily market structure low (MSL) buy triggered on the $10.43 breakout. The daily rifle chart has a downtrend with a falling 5-period MA at $11.65 testing the daily 50-period MA at $11.28 with a falling 15-period MA at $12.24. The daily lower Bollinger Bands (BBs) sit at $10.81 with upper BBs at $10.81. The daily stochastic triggered a mini inverse pup oscillation down through the 20-band. Prudent investors can look for opportunistic pullback levels at the $10.43 daily MSL trigger, $9.67 fib, $9.12 fib, $8.61, $8.05, $7.35 fib, and the $6.40 fib level. Upside trajectories range from the $12.47 fib towards the $15.20 fib level.



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