Tempus AI Is a Buy, If You Can Handle the Volatility

Core Viewpoint - Tempus AI is positioned as a significant player in the healthcare AI sector, with expectations for long-term growth and profitability despite a slow start in 2024 [3][4]. Company Overview - Tempus AI utilizes AI technology to enhance patient testing and assist physicians in making timely diagnoses and treatment plans [3]. - The company boasts the world's largest clinical and molecular data database, which supports personalized patient care [4]. - The platform is widely adopted by various healthcare providers, including cardiologists, oncologists, research centers, and pharmaceutical companies [4]. Market Potential - The healthcare sector is projected to grow at a nearly 40% CAGR over the next five years, indicating a substantial opportunity for AI integration [4]. - Institutional buying has been strong, with nearly $2.3 billion in shares purchased by institutions by the end of February 2025, representing about 25% of the market cap [6]. Financial Performance - Recent Q4 results showed revenue and earnings fell short of consensus estimates, but growth is accelerating due to client acquisitions [7]. - The company has a high client retention rate of 140%, suggesting that clients are increasing their service usage significantly after onboarding [8]. - Revenue growth is expected to accelerate to a hyper 79% in 2025, with profitability anticipated by 2026 [8]. Analyst Ratings and Stock Performance - The current 12-month stock price forecast for Tempus AI is $60.55, with a moderate buy rating based on 12 analyst ratings [9]. - Short interest in the stock has been significant, approaching 25% at the end of January, which may impact market volatility [10]. - Following the 2025 guidance update, the stock price has realigned with a more realistic valuation, trading at $58.50, down over 35% from recent highs [12].