TD Cowen says this small-cap tech stock will rise nearly 30%
Credo Technology has emerged to take the crown as TD Cowen’s top small and mid-cap stock pick after a hot start to the year. The investment firm has upgraded the technology company to buy from its stock holdings. Analyst Matthew Ramsay also raised his price target on the stock to $35 from $24, implying that Credo shares could rise 28% from Monday’s close. Credo, which specializes in ethernet connectivity services, grew 49% in 2024. Ramsay thinks there is more growth opportunity ahead. CRDO YTD Mountain Credo YTD Chart “As a key enabler of higher throughput speeds, especially beyond 800G, we champion the technology and engineers at Credo while maintaining a balanced perspective equal in inventory,” Ramsay wrote. “However, with the model likely to change starting from F2H25 (January), we’re no longer participating – we upgrade to Buy and name Credo our Best Smidcap Idea as revenue accelerates and expands across programs and products.” The analyst pointed to the possibility of a near-term change in the company’s profits. Specifically, he thinks Credo’s revenue could skyrocket in the second half of the fiscal year as some of its programs take off, including some building GenAI. Credo’s significant program at Microsoft and Amazon in its active power cables will also play a role in pushing the company’s fundamentals higher. “Credo’s growth is likely to be largely product-led (although IP remains an important part of its overall portfolio) and may be driven first by the Active Electrical Cable (AEC) category. , then by the SERDES chiplet products and finally by the company’s opportunity in the optical DSP space,” Ramsey noted. Another catalyst came when Credo began to diversify and expand its customer base significantly away from its core customer, Microsoft. Over time, this should reduce the risk of “inventory-induced sales fluctuations” for Credo, the analyst added. The company has also begun expanding its product offerings. “Overall, we see diversifying the company’s revenue base as a key de-risking measure of the model and will benefit future revenue sustainability,” Ramsey said.
