Wall Street brokerages have initiated coverage on Tempus AI, a genetic testing firm backed by SoftBank (TYO:9984), with a positive outlook. Analysts are optimistic about the company’s AI-powered clinical and molecular data library, predicting it could revolutionize diagnostic and testing kits.
Overview of Tempus AI
Based in Chicago, Illinois, Tempus AI provides genomic diagnostics tests across various medical fields, including oncology, neuropsychiatry, radiology, and cardiology, serving clinicians and hospital systems.
Analyst Ratings and Predictions
Seven major brokerages, including J.P. Morgan, Morgan Stanley, BofA Global Research, and Stifel, have initiated coverage with “buy” or “overweight” ratings. TD Cowen has set the highest price target at $50. These ratings followed the end of Tempus’ IPO “quiet period” on Tuesday.
The optimistic coverage has positively impacted Tempus AI’s stock, which rose by 7% to $35.75. However, the stock had previously declined by 17.5% from its closing price on June 14, the day of its market debut, to the end of trading on Monday.
Growth Projections
J.P. Morgan projects Tempus AI will achieve approximately 33% revenue growth annually through 2027 and expects the company to become profitable by the second half of 2025. Despite a net loss widening to $289.8 million in 2023 from $214.1 million in 2022, total revenue surged by 65.8% to $531.8 million. However, revenue from AI applications remains minimal, described as “immaterial” in regulatory filings.
Competitive Edge
J.P. Morgan highlights that Tempus AI’s unique combination of clinical genomic data has been successfully monetized through licensing agreements with pharmaceutical and biotech companies, setting it apart from competitors. Morgan Stanley anticipates 27% revenue growth through 2028 and expects the company to break even by 2027, noting that building a similar database would be costly and time-consuming for competitors.
BofA Global Research sees potential for Tempus AI to further expand its relationships with biotech and large pharmaceutical companies, increasing both the scope of existing partnerships and the number of new customers.
Investment Insights
The bullish stance of these brokerages reflects confidence in Tempus AI’s innovative approach and growth potential, signaling a promising investment opportunity for those looking to diversify their portfolios with cutting-edge healthcare technology.
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