Cable maker Credo slumps on forecast hit as top customer cuts orders (updated)
15/02/2023 15:19
(Updates shares, adds analyst comment, background)
Feb 15 (Reuters) - Credo Technology Group Holding
CRDO.O forecast fourth-quarter revenue well below estimates on
Tuesday following a cut in orders from the cable maker's largest
customer, sending its shares down as much as 43% on Wednesday.
The stock, which fell to $11.07, is set for its worst day
since going public in January last year at an issue price of
$10.
Although the company did not disclose the name of the
customer, Cowen analysts said they believed it was Microsoft
Corp MSFT.O , which owns Azure, one of the biggest cloud
services providers in the world.
Reuters could not immediately verify if Microsoft was
Credo's largest customer. According to a company filing, one of
Credo's customers accounted for 44% of its revenue in the second
quarter of fiscal 2023.
Credo, which makes cables used in data centers, said it was
expecting fourth-quarter revenue of $30 million to $32 million,
below estimates of $58.3 million, according to Refinitiv data.
"The magnitude of the topline reset could be a concern for
investors given also broader commentary on resilient Microsoft
capex vs. most other Cloud/hyperscalers," Mizuho analysts said
in a note.
At least five brokerages cut their price target on the
stock. Cowen slashed it the most by $7 to $11 and downgraded the
stock to "market perform" from "outperform".
Credo, which also designs chips, currently outsources all
its semiconductor manufacturing to Taiwan Semiconductor
Manufacturing Company 2330.TW .
Warren Buffett's Berkshire Hathaway Inc BRKa.N had cut
its stake in the Taiwanese chipmaker by 86.2% to 8.29 million
sponsored American depositary shares, per a regulatory filing on
Tuesday. urn:newsml:reuters.com:*:nL1N34U28K
(Reporting by Chavi Mehta and Akash Sriram in Bengaluru,
additional reporting by Lance Tupper in New York; Editing by
Anil D'Silva and Arun Koyyur)
((Chavi.Mehta@thomsonreuters.com;))