Credo stock plunges toward record loss after largest customer cuts purchases

Shares of Credo Technology Group Holding Ltd. plummeted toward a record one-day selloff after the data infrastructure networking company disclosed that its largest customer cut demand for its products.

The selloff comes the day after the stock closed at a record $19.36 on Tuesday.

The company said in an 8-K filing with the Securities and Exchange Commission late Tuesday that it understands the reasons for its largest customer cutting purchases of its products “are unrelated to Credo’s performance.” Credo said it does not expects its market share with the customer to be affected.

Credo’s stock

fell 46.6% in afternoon trading, putting them on track close at a four-month low. The previous record plunge for the stock, which went public in January 2022, was 11.9% on March 14, 2022.

Trading volume ballooned to 20.4 million shares, which compares with the full-day average over the past 30 days of about 1.7 million shares.

According to the company’s annual report for the fiscal year ended April 30, 2022, the largest customer accounted for 30% of total revenue.

As a result of the customer’s decision, as well as macroeconomic headwinds, the company now expects revenue for the fiscal fourth-quarter through April. 29 to be $30 million to $32 million, which was well below the FactSet consensus as of Jan. 31 of $58.3 million.

The company also expects revenue for the fiscal year ending April 2024 to be flat with revenue for the year ending April 2023, while the FactSet revenue consensus as of Jan. 31 called for 48% growth.

No less than five of the eight analysts surveyed by FactSet have cut their stock price target in the wake of Credo’s disclosure, and at least one analyst downgraded it. The average price target fell to $13.88 from $18.75 at the end of January.

Analyst Tore Svanberg lowered his price target on Credo’s stock by 21%, to $14 from $19, but kept his rating at buy.

“We view Credo as the ‘last man standing’ amidst the industry-wide correction, and given the later hit and the high customer concentration, we believe the impact looks somewhat disproportionate on the surface,” Svanberg wrote in a note to clients.

With the selloff, the stock had dropped 32.7% over the past three months, while the S&P 500

had gained 3.5%.