Tempus AI
TEM
$45.53
+4.38%
Tempus AI is a technology company operating in the healthcare information services industry, focused on building the Tempus Platform to liberate and operationalize siloed healthcare data. The company positions itself as a disruptor in precision medicine, leveraging artificial intelligence, including generative AI, to enhance the accuracy and personalization of laboratory diagnostics. The current investor narrative centers on the company's growth trajectory post-IPO and its ability to scale its AI-powered platform, though recent financial results showing significant losses amidst rapid revenue growth are fueling debate about its path to profitability and long-term valuation.…
TEM
Tempus AI
$45.53
Investment Opinion: Should I buy TEM Today?
Rating: Hold. The core thesis is that Tempus possesses a compelling long-term growth story in AI-powered precision medicine, but near-term headwinds from persistent losses, cash burn, and severe technical damage create excessive risk for new capital at the current juncture.
Supporting evidence for this Hold rating includes the stock's elevated valuation (PS of 8.09x) despite deep unprofitability (net margin of -19.27%), the concerning acceleration of the downtrend (-22% over 1 month), and the heavy cash burn (-$404M TTM FCF). Positively, analyst sentiment remains generally bullish with an average revenue target of $3.12B, and gross margin expansion to 69.64% offers a glimmer of operational improvement. However, the stock trades just 5.3% above its 52-week low, indicating a lack of positive catalysts to arrest the decline.
The two biggest risks that could invalidate this Hold thesis are 1) a breakdown below the $41.73 support level, which would signal a new leg down and likely trigger a downgrade to Sell, and 2) a deterioration in the balance sheet evidenced by an increase in the debt-to-equity ratio above 2.0 or a current ratio falling below 2.0. This Hold would upgrade to a Buy if the stock establishes a durable base above support and shows concrete progress toward reducing quarterly operating losses, or if the PS ratio compresses further toward 5x without a degradation in growth prospects. The stock is currently fairly valued to slightly overvalued relative to its financial fundamentals, but the compressed multiple relative to its own history suggests the market has already priced in significant skepticism.
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TEM 12-Month Price Forecast
Tempus presents a classic high-risk, high-potential growth story caught in a valuation reset. The fundamental growth engine is powerful, but the financial model is broken, and the stock's price action reflects a crisis of confidence. The neutral stance reflects the high probability of continued volatility (base case) as these opposing forces battle. The stance would turn bullish on evidence of sustainable margin expansion and a reduction in cash burn, turning bearish on a breakdown below $41.73 or a material growth slowdown. For now, the stock is a 'show me' story, best watched from the sidelines until the trend or fundamentals show a decisive inflection.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Tempus AI's 12-month outlook, with a consensus price target around $59.19 and implied upside of +30.0% versus the current price.
Average Target
$59.19
4 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
4
covering this stock
Price Range
$36 - $59
Analyst target range
Analyst coverage is limited with only 4 firms providing estimates, indicating this is a newer public company with still-evolving institutional interest. The consensus leans bullish, with recent institutional ratings from firms like Morgan Stanley ('Overweight'), Needham ('Buy'), and Guggenheim ('Buy') maintaining positive stances, though JP Morgan remains at 'Neutral'. The average revenue estimate for the next period is approximately $3.12 billion, with a tight range from $3.05 billion to $3.17 billion, showing strong agreement on the top-line growth trajectory. The wide dispersion in historical price targets and valuation multiples, however, signals ongoing uncertainty about the appropriate valuation framework for this high-growth, pre-profitability AI healthcare story.
Bulls vs Bears: TEM Investment Factors
The evidence currently tilts bearish, driven by the stock's severe technical breakdown, deep and ongoing losses, and heavy cash burn that outweighs its impressive top-line growth. The bull case rests on the sustainability of hyper-growth and eventual margin expansion leading to profitability, while the bear case focuses on the valuation unsupported by fundamentals and the risk of a financing crunch. The single most important tension in the investment debate is the race between revenue scaling and cash consumption: whether Tempus can achieve operating leverage and positive cash flow before investor patience or access to capital runs out.
Bullish
- Exceptional Revenue Growth: Q4 2025 revenue grew 82.98% year-over-year to $367.2 million, demonstrating the company's ability to scale its AI platform rapidly. This hyper-growth is the core of the investment thesis, suggesting strong market demand for its precision medicine solutions.
- Gross margin expanded significantly from 60.63% in Q1 2025 to 69.64% in Q4 2025, reaching 89.74% in the most recent quarter. This indicates improving operational leverage and pricing power as the business scales, providing a clearer path to eventual profitability.
- Analyst Consensus Remains Bullish: Despite the stock's decline, institutional analysts from Morgan Stanley, Needham, and Guggenheim maintain 'Overweight' or 'Buy' ratings. The average revenue estimate for the next period is $3.12 billion, implying continued strong growth and anchoring positive sentiment.
- Valuation Compression from Highs: The current PS ratio of 8.09x is near the lower end of its observable history, which has seen ratios as high as 51.81x post-IPO. This significant de-rating has priced in much of the growth deceleration and loss concerns, potentially reducing downside risk from multiple compression.
Bearish
- Severe and Accelerating Technical Downtrend: The stock is down 29.82% over the past year and 22.12% over the past month, underperforming the SPY by 27.72 percentage points in the last month. Trading just 5.3% above its 52-week low of $41.73, it shows persistent weakness and a lack of investor confidence.
- Deep Unprofitability and Cash Burn: The company reported a Q4 2025 net loss of $54.2 million with a trailing net margin of -19.27%. Trailing twelve-month free cash flow is deeply negative at -$404.0 million, indicating a heavy reliance on external financing to sustain operations and growth.
- High Debt and Negative ROE: A debt-to-equity ratio of 1.66 suggests significant financial leverage. Coupled with a return on equity of -49.87%, this indicates inefficient use of shareholder capital and a business model that destroys value as it prioritizes growth over earnings.
- Elevated Valuation Despite Losses: A trailing PS ratio of 8.09x is elevated for a healthcare services company, especially one with negative earnings and cash flow. The forward EV/Sales of 6.49x still implies a premium that requires sustained hyper-growth to justify.
TEM Technical Analysis
The stock is in a pronounced and sustained downtrend, having declined 29.82% over the past year and currently trading near the bottom of its 52-week range, just 5.3% above its 52-week low of $41.73. This positioning near multi-month lows suggests the stock is in a state of persistent weakness, presenting a potential value trap rather than a clear opportunity, as it has failed to establish a meaningful base of support. Recent momentum is severely negative and accelerating the longer-term downtrend, with the stock down 22.12% over the past month and 15.44% over the past three months, significantly underperforming the SPY which gained 5.6% and 8.42% over the same periods, respectively. This extreme negative relative strength signals deep-seated selling pressure and a lack of investor confidence in the near-term story. Key technical support is clearly defined at the 52-week low of $41.73, while resistance sits far above at the 52-week high of $104.32. A breakdown below $41.73 would likely trigger another leg down, while any recovery faces a steep climb through heavy overhead supply; the stock's high volatility is evidenced by a maximum drawdown of -58.96%, indicating it carries substantial risk for investors.
Beta
—
—
Max Drawdown
-59.0%
Largest decline past year
52-Week Range
$42-$104
Price range past year
Annual Return
-28.6%
Cumulative gain past year
| Period | TEM Return | S&P 500 |
|---|---|---|
| 1m | -18.5% | +3.3% |
| 3m | -18.9% | +6.9% |
| 6m | -30.7% | +12.4% |
| 1y | -28.6% | +23.4% |
| ytd | -27.0% | +7.6% |
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TEM Fundamental Analysis
Revenue growth is exceptionally strong but shows signs of sequential deceleration; Q4 2025 revenue reached $367.2 million, representing a robust 82.98% year-over-year increase, yet this marks a slowdown from the torrid pace seen in prior quarters of 2025. The core business is scaling rapidly, but investors are closely watching for sustainability of this hyper-growth. The company is deeply unprofitable, with a Q4 2025 net loss of $54.2 million and a trailing net margin of -19.27%, though the gross margin of 69.64% is healthy and improved significantly from 60.63% in Q1 2025. The path to profitability remains distant, as operating expenses of $377.8 million in Q4 far outstripped gross profit of $329.5 million, indicating heavy investments in growth and technology are continuing to weigh on the bottom line. Financial health is a concern due to significant cash burn, with trailing twelve-month free cash flow deeply negative at -$404.0 million and a debt-to-equity ratio of 1.66, suggesting reliance on external financing. While the current ratio of 3.13 indicates sufficient short-term liquidity, the negative return on equity of -49.87% highlights inefficient use of shareholder capital as the company prioritizes growth over earnings.
Quarterly Revenue
$367211000.0B
2025-12
Revenue YoY Growth
+0.82%
YoY Comparison
Gross Margin
+0.89%
Latest Quarter
Free Cash Flow
$-403985000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
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Valuation Analysis: Is TEM Overvalued?
Given the company's negative net income, the primary valuation metric selected is the Price-to-Sales (PS) ratio. Tempus trades at a trailing PS ratio of 8.09x, which is elevated for a healthcare services company, reflecting a premium for its high growth rate and AI narrative. The forward-looking EV/Sales ratio of 6.49x is somewhat lower, suggesting analysts anticipate revenue growth will outpace any potential multiple compression in the coming year. Compared to its own historical range, the current PS ratio of 8.09x is near the lower end of its observable history, which has seen ratios as high as 51.81x post-IPO; this compression indicates the market has significantly de-rated the stock as growth has decelerated and losses have persisted, moving from pricing pure potential to demanding more tangible financial progress.
PE
-42.0x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range -105x~0x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
-47.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks are severe and center on profitability and cash flow. The company is burning cash at an alarming rate, with TTM free cash flow of -$404 million, and carries significant leverage with a debt-to-equity ratio of 1.66. While revenue growth is robust at 83% YoY, operating expenses of $377.8 million in Q4 2025 far outstripped gross profit of $329.5 million, indicating the path to profitability remains long and uncertain. The negative return on equity of -49.87% highlights capital inefficiency, making the company dependent on continued external financing to fund its growth ambitions.
Market & Competitive Risks are heightened by the stock's premium valuation and weak technical posture. Trading at a PS ratio of 8.09x, Tempus carries a significant growth premium that is vulnerable to compression if revenue growth decelerates further or the market sours on pre-profitability AI stories. The stock's extreme underperformance versus the market (down 22% vs. SPY +5.6% over 1 month) and its position near 52-week lows reflect a complete loss of momentum. Competitive and regulatory risks in the healthcare AI space are omnipresent, and the recent news of Pathos AI's acquisition highlights active consolidation and competition in the oncology AI segment.
Worst-Case Scenario involves a vicious cycle where decelerating revenue growth triggers a loss of investor confidence, leading to a collapse in its premium valuation and difficulty accessing capital markets. This could force aggressive cost-cutting that stunts growth, validating bearish concerns and leading to a prolonged downturn. The realistic downside is significant; a break below the key technical support at the 52-week low of $41.73 could see the stock test levels implied by its maximum drawdown of -58.96%. From the current price of $43.93, this scenario implies a potential loss of another 5% to the immediate support level, with further downside to the mid-$30s or lower if financing concerns escalate.
FAQ
The key risks are, in order of severity: 1) Financial Sustainability Risk: The company is burning cash at a rate of -$404 million (TTM FCF) with a debt-to-equity of 1.66, raising solvency concerns if growth stalls. 2) Profitability Risk: With a net margin of -19.27% and no clear near-term path to breakeven, continued losses could erode shareholder equity (ROE of -49.87%). 3) Valuation & Sentiment Risk: The stock's premium PS multiple of 8.09x is vulnerable to compression if its 83% YoY growth decelerates, potentially triggering further sharp declines. 4) Technical Risk: The stock is in a pronounced downtrend, underperforming the market by 55 percentage points over the past year, indicating persistent selling pressure and a lack of support.
The 12-month forecast is highly bifurcated, with a 50% probability (base case) of the stock trading between $48 and $60 as it remains volatile but range-bound. There is a 25% probability (bull case) it could rally to $70-$85 if it demonstrates rapid progress toward profitability, and a 25% probability (bear case) it falls to $35-$42 if growth decelerates and losses mount. The most likely scenario is the base case, where strong revenue growth is offset by persistent losses, keeping the stock in a state of suspended animation and high volatility. The key assumption is that revenue growth does not fall off a cliff, allowing the narrative time to develop.
TEM is fairly valued to slightly overvalued based on traditional fundamentals, but significantly devalued from its post-IPO highs. The trailing Price-to-Sales ratio of 8.09x is elevated for a healthcare services company and prices in continued hyper-growth. However, this is a steep compression from historical multiples above 50x. The valuation implies the market expects strong revenue growth (consensus ~$3.12B next period) but remains skeptical of the path to profitability. Compared to its own history, it's cheap; compared to profitable peers, it's expensive. The valuation is thus a reflection of high expectations and high uncertainty.
TEM is not a good buy for most investors at the current moment. While the long-term AI in healthcare story is compelling, the stock is in a severe downtrend, down 22% in the last month and trading just above its 52-week low. The company is deeply unprofitable with a net margin of -19.27% and burning over $400 million in cash annually. It could become a good buy for very risk-tolerant, long-term investors only if it first shows technical stabilization above $42 and provides concrete evidence that quarterly losses are peaking. The current risk/reward is unfavorable.
TEM is unsuitable for short-term trading or investment due to its extreme volatility (max drawdown of -58.96%), negative momentum, and lack of near-term catalysts. It is purely a long-term, speculative growth investment for investors with a 3-5 year horizon who can withstand significant interim losses. The company is in a heavy investment phase, and the thesis will take years to play out as it seeks to achieve scale and profitability. There is no dividend, and earnings are deeply negative, eliminating any income or value characteristics. A minimum holding period of 3 years is suggested to allow the business model time to mature, but only for capital that can be fully risked.