Credo Technology Group: Contradictory views on Insider Selling and Bullish Analysts

The current situation surrounding Credo Technology Group Holding Ltd (CRDO) on Wall Street encapsulates a key dilemma faced by investors: Should they trust the positive outlook provided by analysts or pay heed to the significant insider selling that has taken place recently? With shares trading at $61.96 on June 19, 2025, a drop of 33% from their peak of $93.22 in late June, the conflicting signals from insiders and analysts are starkly apparent.

Insider Sell-Off: Strategic Move or Cause for Alarm?
The notable trend within Credo’s leadership has been a consistent reduction in their holdings over the past few months. From January to June 2025, insiders have collectively sold over 29 million shares, amounting to a substantial sum of over $2 billion. Of particular interest is Lip-Bu Tan, a director and co-founder, who alone sold 26 million shares, predominantly through affiliated entities such as Walden Technology Ventures. His transaction of 8.4 million shares at $90–$93 in late June, near the stock’s recent highs, garnered proceeds of $8.4 million. Despite still indirectly holding 694,000 shares, the scale of Tan’s sales has raised doubts about his confidence in Credo’s future prospects. Additionally, Chief Technology Officer Chi Fung Cheng, who holds 7.4 million shares through a family trust, has also been consistently offloading shares since 2024, often utilizing pre-established Rule 10b5-1 trading plans. While these plans are designed to prevent allegations of insider trading and suggest a systematic diversification of portfolios, the cumulative effect of these sales, combined with similar actions by the COO and CFO, has left investors skeptical.

Analysts’ Optimistic Stance: Growth Potential with a Premium
Despite the significant insider selling, analysts have maintained an optimistic outlook on CRDO. As of June 2025, 11 analysts have rated CRDO as a “Buy” or equivalent, with a median price target of $70, and a high target of $84 from Goldman Sachs. Their bullish perspective is largely based on Credo’s position in the $250 billion data infrastructure market, driven by artificial intelligence, high-performance computing, and major cloud providers like AWS. The company’s impressive 63.6% gross margins and 154% year-over-year revenue growth in 2024 emphasize its technological expertise in energy-efficient semiconductors and optical interconnects. Analysts argue that Credo’s patented chiplet technology and partnerships with leading cloud providers justify its premium valuation, despite metrics like a P/E ratio of 1,990x and a Price/Sales ratio of 31x that far exceed industry averages.

The Discrepancy: Understanding the Divide
The discrepancy between insider actions and analyst forecasts can be attributed to differing time frames and motivations:
1. Insiders’ Realism: Executives may be capitalizing on gains following a 300% surge from 2022 lows, seeking to diversify their wealth, or hedging against potential risks in execution. Credo’s reliance on a few key clients and the cyclical nature of technology spending could rationalize their caution.
2. Analysts’ Positivity: The focus on long-term trends in artificial intelligence and data centers by the financial community highlights Credo’s specialized technology’s potential for 20%+ annual revenue growth. Although the current price-to-sales ratio is high, it aligns with similar phases of growth seen in competitors like Marvell Technology (MRVL) or Inphi Corporation (IPHI).

Investment Considerations: Tread Carefully
While Credo’s fundamental strengths are persuasive, investors must evaluate three key risks:
– Valuation Vulnerability: A P/E ratio of 1,990x implies a level of perfection that may not be sustainable. Any setbacks in product development or customer relationships could trigger a significant market correction.
– Insider Signaling: The substantial $2 billion in insider sales, especially at prices exceeding $80, indicate that leadership views current valuations as elevated.
– Market Fluctuations: The technology sector’s inherent boom-and-bust cycles have the potential to impact margins if demand for cloud infrastructure decelerates.

In Summation: A Speculative Choice for Growth Investors
Credo Technology Group presents a high-risk, high-reward opportunity. Its cutting-edge technology is unquestionably innovative, and the optimism of analysts is founded on tangible opportunities in artificial intelligence and data infrastructure. Nevertheless, the extensive insider selling and lofty valuation levels warrant a cautious approach. Investors are advised to:
– Consider purchasing during dips below $55, provided the fundamentals remain strong.
– Avoid initiating positions at current prices unless willing to bet on prolonged growth.
– Keep a close eye on insider activity, particularly further sales by Tan or Cheng, which could indicate deeper concerns.

In conclusion, Credo’s narrative centers on its future potential against current overvaluation. At present