Credo slips into bear market as insiders sell before earnings

Credo Technology Group shares have declined more than 24% from this year’s high to roughly $232, placing the stock in a bear market as the company prepares to report quarterly results on Tuesday. The drop follows sizable gains earlier in the year.

Exchange records show insiders sold 589,284 Credo shares over the past three months and 2.88 million shares over the last 12 months. Among the largest sellers were Chief Operating Officer Yat Tung and Chief Technology Officer Chi Fung.

Options market data indicate traders expect elevated volatility around the earnings release. Implied volatility on Credo options rose to about 122%, compared with historical volatility near 96%. The put/call ratio is below 1. Most call open interest is at the $240 and $250 strikes, while notable put interest is concentrated at $235.

Analysts’ consensus for the coming quarter calls for revenue of $471 million, about 111% higher than a year earlier, driven by demand for active electrical cables, optical DSPs, optical transceivers and PCIe retimers. Quarterly earnings per share are forecast at $1.17 versus $0.52 a year earlier. For the fiscal year, consensus estimates put revenue near $2.27 billion and EPS around $6.27.

Several sell-side firms revised price targets ahead of the report. TD Cowen raised its target to $300 from $260. Susquehanna, Barclays, Bank of America and Evercore set targets at $250, $300, $340 and $325, respectively.

On technical charts, Credo reached $308 on June 22, fell to about $175 during a pullback, recovered to near $285 and later moved to around $232. The stock remains above its 100-day exponential moving average and has traded near the lower boundary of an Andrews pitchfork. A Murrey Math pivot level was breached on the upside. Some technical models identify potential near-term resistance near $250 and support near $176.

Credo is scheduled to report results on Tuesday. Market participants will focus on revenue, margins and forward guidance. Insider transactions, options activity and recent analyst target revisions have increased market attention ahead of the release.