CRDO - Credo Tech shares nosedive 45% as largest customer cuts back on deals

Credo Technology Group ( NASDAQ: CRDO ) shares plunged 45% in pre-market trading Wednesday as the communications technology provider said that its largest customer cut its purchasing plans for the near term.

In a Valentine's Day filing with the Securities and Exchange Commission, Credo ( CRDO ) said that its largest customer "reduced its demand forecast for certain Credo products for reasons Credo understands are unrelated to Credo’s performance." Credo ( CRDO ) said that it now expects sales for its fiscal fourth-quarter, which ends in April, will be between $30M and $32M, and that full-year revenue will be flat with a year ago.

Credo ( CRDO ) didn't disclose who its largest customer is, but Cowen analyst Matthew Ramsay said it is likely to be Microsoft ( MSFT ). Ramsay cue his rating on Credo's ( CRDO ) stock to market perform, or neutral from outperform, and lowered his price target on the company's stock to $11 a share from $16.

Ramsay said Credo's ( CRDO ) technology is "rock solid", but the sales warning will cause the company to "take time to rebuild [business] momentum."

Bank of America analyst Vivek Arya also cut his rating on Credo ( CRDO ), going all the way to underperform, or sell, from buy, and slashed his price target to $12 a share from $18. Arya said that he believes Credo ( CRDO ) is also dealing with some "uncertainty" over the timing of adding a second major customer to its business rolls.

Wall Street analyst have a consensus buy rating on Credo's ( CRDO ) stock, while Seeking Alpha authors give the shares a rating of hold. Seeking Alpha's Quant System, which historically outperforms the stock market, believe Credo ( CRDO ) shares are worthy of a hold rating as well .

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