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Analyst Estimates: Here's What Brokers Think Of Credo Technology Group Holding Ltd (NASDAQ:CRDO) After Its Second-Quarter Report

Investors in Credo Technology Group Holding Ltd (NASDAQ:CRDO) had a good week, as its shares rose 3.8% to close at US$14.94 following the release of its second-quarter results. The results overall were pretty much dead in line with analyst forecasts; revenues were US$51m and statutory losses were US$0.02 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Credo Technology Group Holding

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After the latest results, the eight analysts covering Credo Technology Group Holding are now predicting revenues of US$211.1m in 2023. If met, this would reflect a major 26% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.0017 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$208.0m and earnings per share (EPS) of US$0.015 in 2023. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.

The consensus price target held steady at US$18.57, seemingly implying that the higher forecast losses are not expected to have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Credo Technology Group Holding, with the most bullish analyst valuing it at US$20.00 and the most bearish at US$17.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Credo Technology Group Holding is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Credo Technology Group Holding's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Credo Technology Group Holding's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 60% growth on an annualised basis. This is compared to a historical growth rate of 138% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.0% annually. Even after the forecast slowdown in growth, it seems obvious that Credo Technology Group Holding is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting Credo Technology Group Holding to become unprofitable next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Credo Technology Group Holding going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Credo Technology Group Holding that you should be aware of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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