Credo Technology Group (CRDO) has entered a bear market, with shares sliding more than 24% from their 2025 peak. The stock recently traded near $232, and the upcoming earnings report on Tuesday will test whether the sell-off has run its course.
Insider selling adds to caution
Data from Barchart shows that insiders have sold 589,284 shares over the past three months, bringing the 12-month total to 2.88 million shares. Notable sellers include COO Yat Tung and CTO Chi Fung. Insider selling often draws attention because company executives typically have more insight into business performance than outside investors.
Options market signals heightened volatility
The options market is pricing in significant movement after the earnings release. Implied volatility has climbed to 122%, compared with historical volatility of 96%. The put/call ratio remains below 1, indicating more call options than puts, which is generally seen as a bullish signal. Most call options are concentrated at $240 and $250 strike prices, while puts are clustered at $235.
Analyst expectations and growth outlook
Wall Street remains optimistic about Credo's growth trajectory. The average revenue estimate for the upcoming quarter is $471 million, representing a 111% year-over-year increase. This growth is driven by demand for active electrical cables, optical DSPs, optical transceivers, and PCIe retimers. Competitors like Lumentum have also reported strong results, supporting the sector's momentum.
Earnings per share (EPS) are expected to rise from $0.52 to $1.17 in the quarter. For the full fiscal year, analysts project revenue of $2.27 billion (up 84% year-over-year) and EPS of $6.27. Many believe Credo could beat these estimates.
Analyst price targets and technical outlook
Several firms have raised their price targets on CRDO. TD Cowen's Sean O'Loughlin increased his target from $260 to $300, while Susquehanna, Barclays, Bank of America, and Evercore set targets of $250, $300, $340, and $325, respectively.
Technically, the stock peaked at $308 in late June before pulling back to $175, then rebounded to $285. Currently, CRDO is trading near the lower boundary of an Andrews pitchfork and above the 100-day exponential moving average. It has also moved above a key pivot level on the Murrey Math lines.
Given these factors, the stock could attempt a bounce toward $250 after earnings. However, a break below the $176 support level would signal further downside. The broader AI trade has been volatile recently, as seen in the AI trade's pivotal week and Broadcom's recent pullback. Investors will be watching Credo's results closely for clues about the sustainability of AI-driven demand.
This article is for informational purposes only and does not constitute financial advice.
