CRDO is undervalued; strong net margins and growth projections support holding or buying despite recent decline.

but more importantly, Credo was down 20% after the earnings report.

But it's really interesting because you look at the difference between these companies. Credo, which is down almost 21% today, is a supplier of copper and photonics for data centers.

Data center technologies like Credo are slowing down due to margin issues.

Oh, before that, I should give you Credo's financial data, because remember what I just said about the importance of margins? Let 's take a quick look at " Credo". Look at this .

For Credo , their revenues increased by 9.6%. Oh. Revenue increased by 9.6%. But the cost of revenues increased by 22.3%. So, their costs rose much more than their revenues, resulting in a gross profit increase of only 3% compared to May.

To be fair, these are not annual figures, but they show weakness from August to May when compared to these figures.

If you look at their selling and management expenses, i.e., what they spend to sell their devices , you will find that they have increased by 43%. The research and development portion rose by approximately 32% , which indicates that total operating expenses rose by 32%, significantly higher than revenue growth.

Therefore, their profit margin was severely affected this quarter.

I don't think they are necessarily overvalued . In fact, with net margins around 50%, their trading close to a single growth factor, with a projected 26% growth for the next four years, might mean holding the stock.

It might be a buying opportunity, but I think the stock is undervalued. I don't own it. I think the stock has dropped 20% today because the market hates it when margins start to decline.

Losing companies, well, a company like Credo will be affected because you will see less demand for those fiber optics or cables in huge data centers , and more of it will be directed towards artificial intelligence for businesses.