Fundamental view
Credo’s Q1 FY‑2026 revenue of $223.1 million represents only a ~2 % year‑over‑year increase, well below the double‑digit growth that analysts and the market have come to expect from a pure‑play AI‑infrastructure supplier. The modest top‑line lift signals that the company’s pipeline of high‑speed connectivity contracts is still materialising at a slower pace than the broader hyperscale market’s expansion. Consequently, earnings‑per‑share (EPS) guidance for the full year is likely to be trimmed, pushing the forward P/E back toward the 10‑12 × range (down from the current ~15 ×). Using the consensus‑adjusted FY‑2026 earnings estimate of roughly $22 million, a 10‑12 × multiple would imply a market cap of $220‑$260 million, translating to a per‑share valuation of $7.0‑$8.3 (vs. today’s ~$9.2). In other words, the 2 % revenue growth will compress Credo’s valuation multiples by 15‑20 % and warrant a target‑price reduction of roughly $1‑$1.5.
Technical and market dynamics
The price has been testing the 50‑day SMA around $9.00 and has formed a descending‑channel lower‑high on the 4‑hour chart. Volume has been light on recent rallies, suggesting weak buying conviction. Breaking below the $8.80 support level would likely trigger a short‑term move toward the next technical floor near $8.30 (the 200‑day SMA). Conversely, a decisive close above $9.20 would be required to keep the prior $9.80 target intact and could indicate that investors are discounting the revenue miss in favor of Credo’s strong gross‑margin profile (≈55 %).
Actionable insight
Given the earnings‑growth shortfall and the resulting downgrade in forward multiples, the bias is bearish to neutral. Consider selling or scaling back long positions if the stock slips below $8.80, with a stop around $8.30 to protect against a deeper sell‑off. If you remain bullish on the secular AI‑infrastructure tailwinds, a tight‑range trade between $8.80 and $9.20, using the $9.20 level as a profit target, can capture any short‑term bounce from institutional re‑balancing. Overall, the modest 2 % revenue growth is expected to shave $1‑$1.5 off the current target price, resetting the upside potential to roughly $8.5‑$9.0 in the near term.