On Tuesday, Tempus AI Inc (NASDAQ:TEM) received an Overweight rating from Morgan Stanley (NYSE:MS), along with a price target of $44.00. The new coverage highlights the company's position at the forefront of healthcare and artificial intelligence/data intersection.
Tempus AI is dedicated to developing intelligent diagnostics for precision medicine and enhancing pharmaceutical research and development efficiency through AI. The firm's focus areas include clinical testing, primarily in oncology, and expediting biopharma drug discovery and clinical trials.
The company has developed a proprietary technology platform and an operating system designed to liberate healthcare data from silos and make it actionable. Morgan Stanley's price target is based on a discounted cash flow (DCF) analysis and suggests a potential 32% increase from the stock's current trading level. The Tempus platform is tapping into a total addressable market (TAM) estimated at approximately $190 billion, which includes $70 billion in genomics and $119 billion in data services.
Tempus AI's business model includes three main product lines: Genomics, Data and Services, and AI Applications. These segments are interlinked, with each designed to support and amplify the others, creating a comprehensive ecosystem for data-driven healthcare solutions. The Overweight rating indicates that Morgan Stanley sees the stock outperforming the average total return of the stocks the analyst covers over the next 12 to 18 months.
The analyst's valuation also includes a bull/bear scenario, which provides a fair value range for Tempus AI's shares. In the most optimistic case, the shares could reach a fair value of $50, while the more conservative estimate places the value at $23. This range underscores the firm's belief in the stock's favorable risk-reward profile.
In other recent news, Tempus AI has been making notable advancements in its operations. The company's Tempus ECG-AF device, which employs artificial intelligence to identify patients at a higher risk of atrial fibrillation/flutter, has received 510(k) clearance from the U.S. Food and Drug Administration, marking a significant step for Tempus AI in its mission to advance precision medicine. This development allows healthcare providers to incorporate Tempus's algorithm into patient care, potentially aiding in the early detection of cardiovascular diseases.
On the financial front, JPMorgan (NYSE:JPM) initiated coverage on Tempus AI, assigning an Overweight rating to the stock with a price target of $42.00. The firm forecasts a compound annual growth rate (CAGR) of approximately 33% in revenue from 2024 to 2027 for Tempus AI. Additionally, the company is projected to achieve adjusted EBITDA positivity by the second half of 2025, driven by robust top-line growth and the profitability of its higher-margin Data business.
In parallel, brokerage firm Stifel initiated coverage on Tempus AI with a Buy rating and a set price target of $45.00. Stifel noted improvements in gross margins and balanced spending expectations for Tempus AI, anticipating that these factors will contribute to the company reaching a positive cash flow in 2026. These recent developments highlight Tempus AI's ongoing growth and progress in both its technological advancements and financial performance.
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