Wall Street analysts optimistic about genetic testing company Tempus AI

Wall Street analysts optimistic about genetic testing company Tempus AI
Wall Street analysts optimistic about genetic testing company Tempus AI

Wall Street brokerages started covering the SoftBank Group-backed Tempus AI after it started with an optimistic note on Tuesday.

The SoftBank Group-backed Tempus AI (TEM.O) opened a new tab on a bullish note on Tuesday, and Wall Street brokerages began covering the firm. The idea is that the company’s AI-powered library of clinical and molecular data could lead to more potent diagnostic and test kits. The Chicago, Illinois-based business provides physicians and hospital systems with genetic diagnostic tests in the fields of neuropsychiatry, cardiology, radiology, and oncology.

With a “buy” or “overweight” rating, seven brokerages—including J.P. Morgan, Morgan Stanley, BofA Global Research, and Stifel—started covering the stock, with TD Cowen setting the highest price target at $50. Tempus’s initial public offering (IPO) underwriters, the brokerages, released their ratings following the conclusion of the so-called “quiet period” on Tuesday. The positive evaluations caused the company’s shares to rise by as much as 7%, to $35.75. Since the closure on June 14, the day of its launch, to the close of business on Monday, the stock has lost 17.5%.

Through 2027, J.P. Morgan anticipates that Tempus’s revenue will increase by about 33%. It anticipates that by the latter part of 2025, the business will make a core profit. While overall sales increased by 65.8% to $531.8 million in 2023, Tempus AI’s net loss increased to $289.8 million from $214.1 million in the previous year. However, a regulatory filing opens a new tab that states that revenue from its AI applications division made up approximately 1% of total sales. Revenue from AI applications was deemed “immaterial” by Tempus.

According to J.P. Morgan, what sets Tempus apart from competitors is their “uniquely combined clinical genomic data, which the company has successfully monetized in the form of licensing agreements with pharma and biotech customers.” Morgan Stanley projects a 27% increase in sales through 2028 and anticipates that the business will break even on core earnings by 2027. Competitors trying to expand their own databases would “probably prove to be costly, cumbersome, and time-consuming efforts,” according to the brokerage.

According to BofA Global Research, Tempus has room to grow both the number of new clients it brings on board and the extent of its current partnerships with biotech and big pharma businesses.

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