Wall Street analysts bullish on genetic testing firm Tempus AI (updated)

Tempus Holdings

09/07/2024 19:54

(Adds background on AI unit revenue in paragraph 8)
       July 9 (Reuters) - Wall Street brokerages started
covering SoftBank Group-backed Tempus AI  TEM.O  on a bullish
note on Tuesday, betting that the company's AI-powered library
of clinical and molecular data could lead to more powerful
diagnostic and test kits.
    The Chicago, Illinois-based company sells genomic
diagnostics tests across oncology and other areas, including
neuropsychiatry, radiology and cardiology to clinicians and
hospital systems.
    Seven brokerages, including J.P.Morgan, Morgan Stanley, BofA
Global Research and Stifel initiated coverage with a "buy" or
"overweight" rating, with the highest price target of $50 by TD
Cowen.
    The brokerages, which were underwriters for Tempus' initial
public offering, issued their first ratings after the so-called
"quiet period" ended on Tuesday.
    The upbeat ratings lifted the shares of the company as much
as 7% to $35.75. The stock has lost 17.5% since the closing on
June 14, its debut day, till the end of trade on Monday.
    J.P.Morgan forecasts roughly 33% revenue growth for Tempus
through 2027. It expects the company to turn a core profit by
the second half of 2025.
    Tempus AI's net loss widened to $289.8 million in 2023 from
$214.1 million a year earlier, while total revenue jumped 65.8%
to $531.8 million.
    However, revenue from its AI applications business
constituted about 1% of the total revenue, according to a
regulatory filing. Tempus described its AI applications revenue
as "immaterial".
    The "uniquely combined clinical genomic data, which the
company has successfully monetized in the form of licensing
agreements with pharma and biotech customers" separates Tempus
from rivals, according to J.P.Morgan.
    Morgan Stanley expects revenue growth of 27% through 2028,
and expects the company to break-even on core profit by 2027.
    The brokerage noted that if competitors tried to grow their
own database, it would "likely prove to be costly, cumbersome
and time-consuming efforts".
    BofA Global Research said there is space for Tempus to
further expand the scope of the existing relationships with
biotech and large pharma companies as well as increase the
number of new customers.

 (Reporting by Roshan Abraham and Mariam Sunny in Bengaluru;
Editing by Shilpi Majumdar)
 ((Roshan.Abraham@thomsonreuters.com))