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With the first six months of the year in the books, Credo Technology (CRDO) is one of the best-performing stocks in 2024. CRDO stock is up 60.4% in 2024, and has surged 80% in the last 12 months.

Credo, valued at $5.27 billion by market cap, provides high-speed connectivity solutions that deliver improved power and cost efficiency, as data rates and bandwidth requirements continue to increase across the data infrastructure market.

Its portfolio of products eases system bandwidth bottlenecks while improving power, security, and reliability. Specifically, Credo’s connectivity solutions are optimized for optical and electrical ethernet applications.

The tech stock went public in early 2022 after raising $200 million in its initial public offering (IPO), and has since returned over 200% to shareholders.

Let’s see if Credo Technology is still a good stock to buy right now.

Strong Revenue Growth

Credo Technology has increased its sales from $58.6 million in fiscal 2021 (ended in April) to $193 million in fiscal 2024.

In fiscal Q4 of 2024, it reported revenue of $60.8 million, up 89.4% year over year. With a gross margin of 65.8% and operating expenses of $32.7 million, the growth stock reported an adjusted net income of $11.8 million, or $0.07 per share, indicating a margin of over 18%.

Similar to other asset-light tech companies, Credo should benefit from high operating leverage. This means the company’s operating income should increase at a faster pace than its revenue. With $410 million in cash, Credo has the flexibility to reinvest in innovation and acquisitions, which should drive future cash flows and earnings higher.

In fiscal 2024, the company reported strong contributions from each of its product lines and license categories. Credo Tech attributed its strong performance in 2024 to artificial intelligence (AI) deployments. Management now expects demand for AI infrastructure to accelerate, and stated, “We believe customers will continue to choose Credo for their most complex connectivity needs, due to our customer centric focus on innovative, high-performance and energy-efficient solutions.”

Credo’s AI business accounted for 75% of total sales in Q4, and should be a key driver of top-line growth, given the need for faster data transmission platforms.

TD Cowen Upgrades CRDO Stock

Investment firm TD Cowen (TD) recently added Credo to its “Best Smidcap Ideas” list, and raised the price target from $24 to $35. According to TD, Credo is a tech enabler of higher line-rate speed in data centers. Notably, its customers include Microsoft (MSFT) and Amazon (AMZN), two Big Tech giants that continue to build data centers for AI applications.

The industry shift towards higher data rates is inevitable to support the growth of generative AI platforms. Basically, TD expects the interconnect speed to double every two years going forward, making Credo an enticing investment choice right now.

What is the Target Price for CRDO Stock?

Out of the nine analysts covering CRDO stock, seven recommend “strong buy,” one recommends “moderate buy,” and one recommends “moderate sell.” The consensus rating is “strong buy,” up from “moderate buy” one month ago.

The average target price for CRDO stock is $29.44, which is lower than the current trading price. TD Cowen's Street-high target of $35 is a premium of 12.1% to Monday's close.

Analysts tracking Credo Tech expect sales in fiscal 2025 to rise by 61.7% to $312 million. Comparatively, adjusted earnings are forecast to grow from $0.09 per share to $0.35 per share.

Priced at 91 times forward earnings, CRDO stock might seem expensive, but quality growth stocks command a premium.

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.