Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 8 Jan, 25 | TEM | Buy | USD 39.58 | USD 42.75 | USD 45.91 | 5 days | 16.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Tempus AI, Inc operates as a healthcare technology company. It engages in providing next generation sequencing diagnostics, polymerase chain reaction profiling, molecular genotyping, and other anatomic and molecular pathology testing to healthcare providers, pharmaceutical companies, biotechnology companies, researchers, and other third parties. The company also offers Insights, a license library of linked clinical, molecular, and imaging de-identified data, as well as a suite of analytical services to analytic and cloud-and-compute tools to pharmaceutical and biotechnology companies; and Trials that provides clinical trial matching services to pharmaceutical companies. In addition, it operates Next; Algos, a suite of algorithmic tests in oncology; Hub, a desktop and mobile platform for ordering, managing, and receiving tests and patient results; and Lens, a platform for researchers and scientists to find, access, and analyze Tempus data. The company has a collaboration with united therapeutics to study use of AI to detect patients at risk for pulmonary hypertension. The company was formerly known as Tempus Labs, Inc. and changed its name to Tempus AI, Inc in January 2023. Tempus AI, Inc was incorporated in 2015 and is headquartered in Chicago, Illinois.
Improved Adjusted EBITDA: Adjusted EBITDA improved significantly by $14.4 million year-over-year, reducing losses from $(36.2 million) in Q3 2023 to $(21.8 million) in Q3 2024. This demonstrates progress toward achieving profitability
Revenue Growth: Total revenue increased by 33% year-over-year to $180.9 million in Q3 2024, showcasing strong demand across the genomics and data services segments
Decline in Genomics Gross Margin: The non-GAAP genomics gross margin dropped to 49.3% in Q3 2024, compared to 51.9% in Q3 2023. This decline, albeit slight, reflects challenges in maintaining profitability in this segment
Net Loss: The company reported a net loss of $(75.8 million) in Q3 2024, widening from $(53.4 million) in Q3 2023. This was influenced by $22.2 million in stock compensation and payroll-related expenses
Tempus faces investment risks from sustained net losses, increased debt from acquisitions, margin pressures in genomics, and reliance on high growth expectations.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 39.58 | 33.25 | 42.75 | 45.91 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Revenue Growth and Business Performance: Tempus AI, Inc. (NASDAQ: TEM), a technology leader in AI-driven precision medicine, reported robust financial results for the third quarter ending September 30, 2024. Revenue surged 33% year-over-year to $180.9 million, driven by significant growth across its genomics and data services segments. Founder and CEO Eric Lefkofsky highlighted the quarter’s achievements, emphasizing the company’s accelerating momentum in genomics and data services, as well as the strategic benefits of its acquisition of Ambry Genetics.
Segment Performance and Growth Drivers: Genomics revenue rose to $116.4 million in Q3 2024, marking a 20.3% year-over-year increase fueled by 23.9% growth in unit volume. Data and services revenue also experienced a sharp uptick, growing 64.4% year-over-year to $64.5 million. Insights, the data licensing arm of Tempus, grew an impressive 86.6%, underpinning a 78.3% non-GAAP gross margin for the data and services segment, compared to 60.5% in the same period of 2023.
Profitability Metrics and Adjusted EBITDA: Despite strong revenue growth, Tempus reported a net loss of $(75.8 million) in Q3 2024, which included $22.2 million in stock compensation expenses and related payroll taxes. However, adjusted EBITDA significantly improved to $(21.8 million), reflecting a $14.4 million year-over-year reduction in losses. Non-GAAP operating expenses increased 17.2% to $139.3 million, driven by ongoing investments in growth initiatives.
Strategic Acquisition of Ambry Genetics: Tempus announced an agreement to acquire Ambry Genetics, a leading provider of hereditary cancer screening, for $375 million in cash and $225 million in shares. The deal, partially financed by $300 million in new debt, is expected to expand Tempus’ testing capabilities and enable entry into new disease categories such as pediatrics, rare diseases, immunology, and cardiology. Ambry, which anticipates over $300 million in 2024 revenue and $40 million in EBITDA, will strengthen Tempus’ hereditary cancer screening offerings and contribute to clinical and scientific advancements.
Operational Highlights and Collaborations: Tempus continued to deepen its partnerships, announcing a multi-year collaboration with BioNTech to leverage its TCR dataset in oncology. The company also extended its strategic agreement with Merck EMD and partnered with OneOncology to enhance biomarker-driven trials in community settings. Additionally, Tempus launched the beta version of its AI-enabled health data management app, Olivia, to empower patients in organizing and managing their health data.
Margin Analysis and Financial Improvements: Tempus reported a slight decline in non-GAAP genomics gross margin to 49.3% in Q3 2024, compared to 51.9% in the previous year, attributed to one-time cash payments in 2023. Conversely, data and services non-GAAP gross margin improved significantly to 78.3%, reflecting robust growth in the higher-margin Insights business. The company ended the quarter with $466.3 million in cash and marketable securities, ensuring strong liquidity to support growth.
Outlook and Future Growth: For the full year 2024, Tempus projects approximately $700 million in revenue, representing 32% annual growth. The company also anticipates adjusted EBITDA losses of approximately $(105 million), a $50 million improvement over 2023. The acquisition of Ambry Genetics is expected to further drive revenue growth and profitability by expanding Tempus’ product portfolio and market reach.
Advancing Precision Medicine: Tempus’ Q3 2024 performance underscores its commitment to advancing precision medicine through AI and data-driven insights. With the acquisition of Ambry Genetics and strong growth across key business segments, the company is well-positioned to expand its impact on patient care and accelerate innovation in healthcare.
Considering the decent fundamentals, associated risks, upward trending topline financials, and other key financial highlights, a 'Buy' recommendation is given on the stock at the current price of USD 39.58, as of January 07, 2025, at 09:10 AM PST.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Healthcare Industry: Health Information Services
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | |
|---|---|---|---|---|---|---|---|---|
| TEM Tempus AI, Inc. Class A Common Stock |
-1.25 2.59% | 46.99 | - | - | 13.29 | 80.58 | 13.27 | |
| GEHC GE HealthCare Technologies Inc. |
-0.66 0.82% | 80.05 | 22.91 | 20.12 | 2.01 | 5.52 | 2.39 | 13.30 |
| VEEV Veeva Systems Inc Class A |
-5.36 2.31% | 226.27 | 54.61 | 33.22 | 12.83 | 6.73 | 11.14 | 58.84 |
| MTHRF M3 Inc |
- -% | 9.45 | 29.72 | 25.00 | 0.05 | 4.38 | 0.04 | 0.12 |
| MTHRY M3 Inc |
- -% | 5.50 | 31.84 | 26.25 | 0.05 | 4.60 | 0.04 | 0.12 |
Data Powered by EOD Historical Data (“EODHD”).
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 07, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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