Credo Technology Group (NASDAQ:CRDO) shares rose 3.5% on Monday after Evercore ISI initiated coverage of the semiconductor company with an Outperform rating and a $325 price target, highlighting what it sees as substantial upside from expanding opportunities in AI networking infrastructure.
The target sits roughly 20% above Friday’s closing price of $271.83 and reflects Evercore’s view that the market is underestimating Credo’s long-term growth potential.
Evercore Sees Broader Opportunity Than Current Market Expectations
According to analyst Mark Lipacis, investors continue to view Credo primarily as a supplier of copper-based connectivity solutions for artificial intelligence data centres.
The company has established itself as a leading player in Active Electrical Cable (AEC) technology, supplying complete connectivity systems that combine both hardware and semiconductor components.
However, Evercore believes this perception fails to capture the scale of Credo’s expansion into optical networking technologies.
“We believe it will be increasingly viewed as a broad copper + optical AI-connectivity play,” Lipacis noted.
Optical Strategy Could Significantly Expand Addressable Market
The firm expects Credo’s growing optical product portfolio to become a major driver of future growth.
The company is investing in optical digital signal processors (DSPs), Silicon Photonics technologies and its ZFOptics product family, applying the same integrated system approach that has proven successful in its copper connectivity business.
Evercore estimates that the move into optical networking could increase Credo’s total addressable market by between 10 and 20 times compared with its current opportunity set.
Strong Growth Forecasts Drive Bullish Outlook
Evercore’s projections significantly exceed broader Wall Street expectations.
The firm forecasts approximately 100% growth in Credo’s core AEC business during 2026, followed by a further 60% increase in 2027.
At the same time, the optical segment is expected to become a meaningful contributor to revenue as adoption accelerates.
According to Evercore, optical products could account for around 25% of total company revenue by 2027.
Earnings Potential Seen Well Above Consensus
Lipacis projects that Credo could generate more than $13 per share in earnings by 2028.
That forecast implies a compound annual earnings growth rate exceeding 70% over the next three years, approximately 40% higher than current consensus estimates.
The analyst believes this earnings trajectory supports a significantly higher valuation than the market currently assigns to the company.
Valuation Viewed as Attractive Relative to Growth
Evercore argues that even after the stock’s strong rally, Credo remains attractively valued when measured against its growth prospects.
Using its 2028 earnings projections, the firm estimates that its $325 price target equates to a price-to-earnings-to-growth (PEG) ratio of approximately 0.4 times.
The brokerage believes this valuation does not fully reflect Credo’s position within the rapidly expanding AI infrastructure market, where demand for high-speed connectivity solutions continues to accelerate as data centre operators scale next-generation computing platforms.