A remarkable start to the year, marked by a 160% surge, has had investors paying close attention to healthcare tech company Tempus AI (TEM). Yet, over the past five days, the stock has lost roughly a quarter of its value, partly catalyzed by the company’s reporting Q4 results that fell short of revenue and earnings estimates. However, the Ark Innovation ETF (ARKK) and the Ark Genomic Revolution ETF (ARKG), led by renowned investor Cathie Wood, have viewed this as a buying opportunity, buying over 400,000 Tempus AI shares. Yet, despite the vote of confidence, shares continue on a downward trajectory.
News Generating Positive Buzz
Tempus is a technology company that integrates artificial intelligence, notably generative AI, in healthcare for efficient diagnostics. The company holds one of the largest clinical and molecular data libraries globally. It offers an Intelligent Diagnostic system that continuously learns from its extensive data to inform physicians’ decisions in real time.
The company recently acquired genetic testing pioneer Ambry Genetics in a strategic move to utilize its diagnostics and data to fuel innovation and enhance solutions for patients, clinicians, and life science companies.
On another positive note for Tempus, they recently announced a collaborative project with the Institute for Follicular Lymphoma Innovation. The collaboration aims to create a follicular lymphoma data library, which is expected to provide crucial insights into the disease.
The company has also grabbed the attention of major investors, with Ark Invest and Cathie Wood demonstrating their bullish stance by becoming the largest institutional shareholders. Wood’s faith in the company’s long-term promise is evident in her decision to invest over $1 billion across the ARK complex.
Top and Bottom-line Misses Despite Solid Growth
The fourth quarter of 2024 saw a 35.8% year-over-year increase in revenue of $200.7 million, yet this fell short of analyst expectations by $2.1 million. While the company posted a net loss of $13.0 million, this represented a significant decrease compared to Q4 2023 ($50.5 million loss) and Q3 2024 ($75.8 million loss). The non-GAAP earnings per share (EPS) of $0.18 missed consensus expectations by $0.03.
For the full year of 2024, annual revenue increased by 30.4% year-over-year to $693.4 million. Although the company experienced a net loss of $705.8 million in 2024, it ended the year with a promising $940 million in remaining Total Contract Value. The company estimates an approximately 79% annual growth in 2025, with an expected revenue of around $1.24 billion.
Analysts Remain Cautiously Optimistic
Analysts following the company have expressed cautious optimism. For instance, in a post-earnings announcement, Needham’s Ryan MacDonald reiterated a Buy rating and increased the price target to $70.00 (from $56.00), noting the company’s recent solid performance and promising growth potential. He anticipates the acquisition of Ambry will significantly enhance Tempus’s growth, with the core business poised to grow approximately 30% and Ambry contributing to mid-to-high teens growth.
Tempus AI is rated a Moderate Buy overall, based on the recent recommendations of 10 analysts. The average price target for TEM stock is $66.22, which represents a potential upside of 19.75% from current levels.
