Mizuho reiterates Credo Tech stock rating on optical tech progress

Mizuho maintained an Outperform rating and $245 price target for Credo Tech (NASDAQ:CRDO) following discussions with top executives at the Open Compute Project. The company's shares are currently trading at $179.23, down 15% in the past week, but analysts believe the stock is undervalued at present. Credo Tech CEO Bill Brennan and CFO Dan Fleming met with Mizuho representatives.

The firm unveiled a 1.6T Active Light Cable featuring μVCSEL at 50m reach, which employs approximately 200 fibers and 30% less power while being 10x lighter than its predecessor AEC. Deployment of this technology is expected in 2027. The μVCSEL complements their existing μLED-based ALC development. Mizuho highlighted that ZFO and NPO, in collaboration with DustPhotonics and SPCX, could generate upside potential of over $600 million in optical revenues for Credo Tech during fiscal 2027.

Additionally, the company announced its μEmitter supply chain, partnering with three major end users, including two leading GPU OEMs and one hyperscaler. Mizuho sees Credo Tech as a competitor to AEC and believes the company is well-positioned with an emerging optical roadmap, thus purchasing the recent pullback. The company's strong gross profit margin of 67% and impressive revenue growth of 165% support this bullish outlook.

For those seeking more in-depth analysis, Credo Technology Group's Pro Research Report is available through InvestingPro, one of 1,400+ available reports. Credo Technology Group has also caught the attention of other analysts, with Stifel reiterating a Buy rating and setting a price target of $310 following product announcements at the Open Compute Project summit.

However, Stifel reduced its price target from $350 to $310 due to valuation concerns while maintaining a positive outlook on the company's diverse product offerings. Mizuho similarly reduced its price target for Credo Tech from $290 to $245 but kept an Outperform rating, noting positive channel checks post-earnings. Mizuho reported that Credo's active electrical cables contributed significantly to shipments and revenues during Nvidia's October quarter deployment.

Jefferies also highlighted Credo's debut of ALC and OmniConnect, stating they have been underappreciated in light of the 1.6T transition. These recent developments demonstrate continued interest and scrutiny from multiple firms regarding Credo Technology Group's position in the market and future prospects.