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The healthcare industry is on the cusp of a transformation powered by artificial intelligence’s (AI) ability to deliver personalized care, optimize diagnoses, and accelerate drug discovery. A recent survey shows that 90% of healthcare executives are seeing positive return on investment (ROI) from generative AI investments - proof that AI is becoming critical for long-term growth.
Few investors grasp this revolution as clearly as Cathie Wood, the visionary behind Ark Invest. Known for backing disruptive innovation, Wood’s latest move has been a pivot toward Tempus AI, Inc (TEM), a rising player in AI-driven precision medicine.
Since its June IPO, Tempus has earned Wood’s confidence and a growing slice of her portfolio. Unfazed by the stock's recent volatility, Wood has been doubling down, betting on Tempus AI's potential to capitalize on AI-driven health solutions. Simultaneously, she is trimming her once-beloved Tesla (TSLA) stake, signaling a shift in strategy.
With Wall Street analysts also upbeat about TEM’s potential and the stock showing promising upside, Wood’s conviction serves as a powerful endorsement. Let’s take a closer look.
About Tempus AI Stock
Tempus AI, Inc (TEM), founded in 2015 and headquartered in Chicago, is transforming healthcare with data-driven precision. Specializing in next-gen sequencing, molecular profiling, and AI-powered pathology testing, Tempus bridges the gap between science and technology. Its platform offers a robust library of de-identified clinical, molecular, and imaging data, empowering pharmaceutical and biotech firms with cutting-edge analytics.
Tempus also connects patients to clinical trials, delivers oncology-focused AI tools, and streamlines test management through its Hub platform. Partnering with United Therapeutics (UTHR), Tempus is working to use AI to detect pulmonary hypertension. Its market capitalization currently stands at $6.3 billion.
Tempus made its market debut at $37 on June 14, 2024, but its shares have edged down nearly 1% since the IPO.
From a valuation standpoint, TEM stock is priced at 20.13 times sales, a premium compared to its peers. However, this steep valuation reflects investor confidence in Tempus AI’s future growth, likely driven by its cutting-edge healthcare innovations.
Cathie Wood Bets Big on TEM, Trims TSLA Holdings
Cathie Wood's ARK Invest has been making bold moves, doubling down on Tempus AI while trimming Tesla stakes. After Tempus AI’s IPO, Wood’s ARK Genomic Revolution ETF (ARKG) began accumulating shares, starting with a $9.25 million purchase of 304,904 shares on June 20, 2024. ARKG steadily increased its holdings, adding 61,157 shares on Sept. 25 and 170,649 more on Oct. 22.
December showcased ARK’s growing confidence. Between Dec. 6 and Dec. 12, Wood grabbed 732,873 shares of Tempus, totaling nearly $30 million by Dec. 13’s close.
Now, Tempus sits prominently in ARK’s portfolios. Wood’s flagship Ark Innovation ETF (ARKK) owns 3.17 million shares, making up 1.75% of its portfolio and ranking as its 19th-largest holding, while the Ark Genomic Revolution ETF holds 936,067 shares, comprising 3.16% of the fund and earning its spot as the 14th-largest holding. Wood’s confidence highlights Tempus AI’s role in advancing AI-powered health solutions.
On the flip side, ARKK sold 76,660 Tesla shares worth over $32 million across its ARKK and ARKQ ETFs, continuing a streak of Tesla reductions throughout December. Wood’s latest rebalancing signals a strategic shift: Increasing exposure to the AI-driven healthcare space while trimming positions in established tech leaders like Tesla.
Tempus AI’s Revenue Beats Estimates
On Nov. 4, Tempus AI dropped its Q3 earnings after the bell, and while profitability remains elusive, the non-GAAP loss of $0.25 per share beat Wall Street’s forecasts. Revenue climbed 33% to $180.9 million, fueled by a 64.4% surge in its data services segment. Meanwhile, genomics growth picked up steam, rising 23.9% year-over-year alongside higher average revenue per clinical test.
Tempus also made major moves in partnerships. It announced a groundbreaking multi-year deal with BioNTech (BNTX) to use its TCR dataset for next-gen oncology treatments. Additionally, the company renewed its strategic partnership with Merck EMD and joined forces with OneOncology to scale biomarker-driven trials. In a game-changing move, Tempus launched its patient-facing app, olivia, which leverages AI to help individuals manage their health data.
Tempus AI is expanding its testing portfolio with the $600 million acquisition of Ambry Genetics, a genetic testing firm with over 25% annual revenue growth. CEO Eric Lefkofsky emphasized Ambry’s strong EBITDA and cash flow, positioning it as a valuable asset for Tempus’s future.
Looking ahead, Tempus reaffirmed its 2024 revenue guidance of $700 million, representing 32% annual growth, and expects a $50 million improvement in adjusted EBITDA.
Analysts tracking Tempus forecast a significant narrowing of its losses. For fiscal 2024, the company is projected to report a loss of $6.15 per share, but that figure is expected to shrink by 78.4% to $1.33 per share in fiscal 2025, signaling a bright future ahead.
What Do Analysts Expect for Tempus Stock?
Despite Tempus AI’s 26% drop this month, Cathie Wood is not the only one bullish on its future. On Dec. 13, Bank of America raised its price target for TEM to $54 from $52, maintaining a "Neutral" rating.
While the Life Sciences Tools sector struggled in fiscal 2024 - hit by cautious pharma and biotech spending and a slow Chinese market - the brokerage firm sees a brighter future. Entering 2025, there's lingering skepticism after a tough year, but BofA notes some encouraging signs emerging, offering hope for a rebound.
Meanwhile, Wolfe Research's Doug Schenkel initiated coverage on TEM with an "Outperform" rating and a $60 price target. Praising the company as "best-in-class" in diagnostic data monetization, Schenkel projects Tempus will achieve a 30% revenue CAGR through 2028. With growing market reach, more tests per patient, and expanded database monetization, Tempus is on track for impressive growth.
On Dec. 9, Guggenheim analyst Subbu Nambi set a "Buy" rating for Tempus AI, with a $74 price target on the stock – the Street’s highest, signaling potential 85.6% upside. Describing Tempus as a "pioneer" in Intelligent Diagnostics, Nambi highlighted its exclusive database and diagnostic insights. With a strong positioning in the high-growth oncology diagnostics market, he sees Tempus' unique data and comprehensive offerings as powerful growth drivers that could keep it ahead of the competition.
Tempus AI's future seems to be caught in a bit of a haze. While the global demand for AI in healthcare is undeniable, Wall Street's optimism has cooled on TEM. Sporting a “Strong Buy” rating three months ago, the stock now holds a more cautious “Moderate Buy” consensus. Of the nine analysts tracking TEM, four are still on the bullish side with a “Strong Buy,” two lean towards a “Moderate Buy,” and three are taking a wait-and-see approach with a “Hold.”
The mean price target of $58.12 suggests upside potential of nearly 50%.
