Credo Technology Plunges 4.87% Amid Earnings Miss and Analyst Volatility: What’s Fueling the Selloff?

Summary
• Credo Technology (CRDO) shares fell 7.9% mid-day, hitting a low of $146.80 amid a 46% surge in trading volume.
• The company reported Q2 2026 guidance but missed Q3 EPS by $0.02, despite a 273.6% YoY revenue jump to $223.07M.
• Analysts remain split, with 15 “Buy” ratings but recent downgrades from Wall Street Zen and Mizuho.

Credo Technology’s sharp intraday decline of 4.87% to $142.1—its lowest since March—has sparked urgency among investors. The selloff follows a mixed earnings report, conflicting analyst ratings, and insider sales totaling $87.8M in 90 days. With the stock trading below its 50-day moving average of $125.51 and a 96.9x dynamic P/E, the move reflects a tug-of-war between bullish revenue growth and bearish sentiment over valuation sustainability.

Earnings Miss and Analyst Volatility Trigger Sharp Decline
Credo’s Q3 earnings report, which missed EPS estimates by $0.02 despite a 273.6% YoY revenue surge, ignited immediate selling pressure. The 20.85% net margin and 19.02% ROE highlighted operational efficiency, but the 96.9x dynamic P/E—well above the 52-week high of $176.7—suggested overvaluation concerns. Compounding this, recent analyst downgrades (e.g., Wall Street Zen to “Hold,” Mizuho to “Outperform”) and insider sales (e.g., $1.4M by James Laufman) signaled internal skepticism. The stock’s 4.87% drop aligns with its beta of 2.59, amplifying market volatility.

Communication Equipment Sector Under Pressure as MRVL Slides 2.73%
The Communication Equipment sector, led by Marvell Technology (MRVL) at -2.73%, reflects broader tech sector jitters. Credo’s 4.87% decline outpaces MRVL’s drop, underscoring its premium valuation and analyst-driven volatility. While MRVL’s decline stems from AI hardware demand moderation, Credo’s selloff is more tied to earnings execution and valuation concerns.

Bearish Options and ETFs: Navigating CRDO’s Volatility
• 200-day MA: $79.29 (far below current price)
• RSI: 60.9 (neutral)
• MACD: 11.69 (bullish divergence)
• Bollinger Bands: 115.01–184.36 (current price near lower band)

Credo’s technicals suggest a short-term bearish trend but a long-term bullish bias. Key support at $138.0 (intraday low) and resistance at $143.30 (intraday high) define the immediate range. With the stock near its 52-week low of $29.09, aggressive short-term traders may target $132–$135 for puts, while long-term bulls should watch a break above $149.38 (previous close).

Top Options:
• CRDO20251003P140 (Put): Strike $140, Expiry 2025-10-03, IV 86.6%, Leverage 25.6%, Delta -0.38, Theta -0.135, Gamma 0.0194, Turnover $12,614. High IV and moderate delta suggest strong bearish potential if the stock breaks $140.
• CRDO20251003P142 (Put): Strike $142, Expiry 2025-10-03, IV 77.03%, Leverage 25.34%, Delta -0.418, Theta -0.0738, Gamma 0.0223, Turnover $45,123. High liquidity and leverage make this ideal for a 5% downside scenario (targeting $135.0).

Payoff Estimation:
At a 5% downside (ST = $135.0), CRDO20251003P140 yields $5.0 per contract (K - ST = $5.0), while CRDO20251003P142 yields $7.0 (K - ST = $7.0). These contracts offer asymmetric risk-reward for bearish bets. Aggressive traders may consider CRDO20251003P140 into a breakdown below $138.0.

Backtest Credo Technology Stock Performance
Here are the back-test results for the “CRDO – Buy after an intraday –5 % plunge” strategy, covering 1 Jan 2022 – 24 Sep 2025. (Key highlights: total return ≈ 151 %, annualised ≈ 47 %, but with a deep historical max-drawdown of ≈ 75 %.)Please review the full interactive report below.Key observations (concise):• Strong headline return and Sharpe (>0.7) driven by large winners, but risk remains high (-75 % historical max-drawdown). • Win-rate is modest; profitability comes from outsized rebounds—confirming the “buy the deep dip” premise. • Tightening the stop-loss or layering a time-based exit could materially reduce drawdown with limited impact on return.Let me know if you’d like further exploration—e.g., alternative stop-loss / take-profit levels, adding a time stop, or comparing against a benchmark buy-and-hold.

Act Now: Target $135.0 Support or Ride the Long-Term Bull Case
Credo’s 4.87% drop reflects near-term valuation concerns but leaves the stock with a 1140.94% 3-year total return, outperforming the S&P 500. Investors should watch the $138.0 support level and analyst actions—Barclays’ $165 target vs. Wall Street Zen’s downgrade. The sector leader, Marvell (MRVL) at -2.73%, highlights broader tech sector fragility. For now, short-term bearish options like CRDO20251003P140 offer tactical entry, while long-term bulls should hold for a retest of $149.38. Watch for $135.0 breakdown or analyst upgrades.