Bank of America Securities reduced its price target for Credo Technology Group to $275 from $340, citing a shift in the company’s growth mix and valuation compression across connectivity stocks.
The bank maintained its buy rating on Credo, whose shares were trading at $206.63 in recent sessions, following the release of fiscal first-quarter 2027 results. Credo reported revenue of $479 million, exceeding Wall Street estimates of $470.38 million, while earnings per share reached $1.20 compared with forecasts of $1.16. Year-over-year revenue surged 115%, with a sequential increase of 10%. Non-GAAP net income rose to a record $236.3 million, supported by a gross profit margin of 68% and an operating margin of 48.2%.
BofA noted that Credo’s transition from active electrical cables (AECs) to optical segments is altering its growth profile, contributing to a lower valuation multiple. The new $275 target implies a 2028 calendar-year price-to-earnings multiple of 25x, down from 34x previously, aligning with a peer range of 13x to 35x.
The bank also raised its fiscal 2028 and 2029 revenue estimates by 5% and 8%, respectively, projecting $530 million in revenue for the current quarter, a 2.5% beat to expectations. Full-year 2027 revenue growth is forecast to exceed 85% year-over-year, driven by optical expansion, including zero-forcing optics, with optical revenue expected to surpass $600 million. Sales growth in the optical segment is projected at a 41% compound annual rate through fiscal 2029.
BofA adjusted fiscal 2028 and 2029 pro forma EPS estimates upward by 3% and 10%, to $9.12 and $11.61, respectively. Stifel maintained a $350 price target on the stock, which has a market capitalization of $38.5 billion.
