To The Moon

U.S. stocks edged back from their records, led by drops for technology companies, but Wall Street still closed out another winning week.

The $S&P 500(.SPX)$ fell 0.3% last Friday, slipping below the record it set a day earlier. The $Dow Jones(.DJI)$ edged up 0.1%. The $NASDAQ(.IXIC)$ composite fell 0.4%.

The best-performing concepts is AI Healthcare. Considering the different perceptions of the stock, this time TigerPicks chose $Tempus AI(TEM)$ to have a fundamental highlight to help users understand it better.

TEM stock rose by 21.21% last week and has increased by 118.54% year-to-date.

$Tempus AI(TEM)$

Tempus AI, Inc. is a technology company advancing precision medicine through the practical application of artificial intelligence in healthcare. The Company provides AI-enabled precision medicine solutions to physicians to deliver personalized patient care and in parallel facilitates discovery, development and delivery of optimal therapeutics.

Outperformed Expectations on Both Lines

Tempus AI reported its most recent earnings results on Aug. 12. We see that Tempus outperformed expectations on both lines, with sizeable beats for both revenues and profit. Revenue growth was very strong, coming in at almost 90%, which was around 5% more than what Wall Street analysts were forecasting.

While the company still isn't profitable, the loss per share was smaller than expected—which naturally is a positive surprise. Tempus' loss per share was also smaller than during the previous quarter, when the company lost $0.24 on a per-share basis; thus, there was some sequential bottom-line improvement. Tempus' revenue performance on a sequential basis was even better—between Q1 and Q2, revenues rose by 23%, which is equal to around 130% annualized.

Strong Growth, Significant Potential

Let's delve into the numbers: The company's revenue is generated across two different segments, the Genomics segment and the Data & Services segment. The Genomics business is larger in absolute terms, and it has delivered better growth during the most recent quarter: Genomics revenues jumped by a huge 116% versus one year earlier, reaching $242 million for the second quarter of 2025.

Data & Services revenues rose by 35%, which is still a very appealing growth rate, but which is considerably less than the growth rate of the larger Genomics business. With Tempus AI's larger business growing a lot faster, overall business growth could accelerate, all else equal, as the faster-growing Genomics business becomes larger as a percentage of overall company-wide revenue generation.

For the remainder of the year, Tempus AI's outlook is very positive. The company forecasts revenues of around $1.26 billion, which indicates revenue growth of around 82% versus the previous year. Tempus AI generated revenues of around $570 million during the first two quarters of the current year; thus, management's guidance implies that the second half will be substantially stronger, with revenues of around $690 million, or close to $350 million per quarter on average.

With better revenue generation in the coming quarters, Tempus AI expects improving profitability as well. This isn't surprising—operating leverage should be a considerable tailwind as long as the company keeps growing at a strong pace.

Tempus AI also saw its gross margin improve recently, which is another driver for improving profitability. The company's gross profit jumped by a hefty 160% over the last year, much more than its already strong revenue growth rate of around 90%.

Management believes that the expected business growth during the remainder of the year will allow the company to become profitable on an EBITDA basis in 2025, with EBITDA being forecasted at around $5 million—that's not a lot, of course, but would represent a huge improvement versus last year's EBITDA loss of around $115 million. If Tempus AI hits this target, and if the company were to see a similar profitability improvement next year, its EBITDA could climb to more than $100 million in 2026.

The markets the company addresses will remain major growth markets for many years to come, I believe: Testing, e.g., for oncology, becomes more important as populations age and cancer risks climb, and since tests become more and more sophisticated, pricing improves as well. The AI/data business, although smaller for now, looks promising as well—deals with $AstraZeneca PLC(AZN)$ in oncology and with Northwestern Medicine in Alzheimer's suggest that partners see a lot of value in the data Tempus AI has to offer.

Stock Still Pretty Expensive

But while there are things to like about Tempus AI, such as its market potential, margin improvement, and business growth, there are also things that don't look great.

First, Tempus AI's valuation remains very high: The company trades with an enterprise value of $11.1 billion, meaning its enterprise value to EBITDA multiple for this year is almost fantastically high, at more than 2,000. Even its EV-to-EBITDA multiple for next year is still pretty high, at more than 100. With a high valuation like this, there is a risk of the company's profits growing but the share price staying the same (or even pulling back), as multiple compression is a real risk.

Second, Tempus AI keeps diluting shareholders:

Chart

Over the last year, Tempus AI's share count has risen by more than 10%, which is a pretty meaningful pace of dilution. As the company isn't profitable on a net income basis yet, and since Tempus needs money to scale up, I wouldn't be surprised if TEM's share count climbs for the foreseeable future, which will mean a lower per-share growth rate relative to the company-wide growth rate for both revenue and EBITDA.

Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on 11 Wall Street analysts offering 12 month price targets for Tempus AI, Inc. Class A in the last 3 months. The average price target is $69.70 with a high forecast of $75.00 and a low forecast of $60.00. The average price target represents a -5.53% change from the last price of $73.78.

Resource:

https://seekingalpha.com/article/4812476-tempus-ai-is-it-a-buy-following-guidance-raise

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