Key Takeaways:
- The 2-Minute Valuation Model values Tempus AI stock at $66/share in 2 years. That’s about 22% upside from the stock’s current price of $54/share.
- Tempus AI’s revenue is projected to grow a total of 177% over the next three years.
- Wall Street analysts maintain predominantly “Buy” and “Outperform” ratings for Tempus with an average price target of about $61/share.
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Tempus AI, a 10-year-old precision medicine company, is revolutionizing healthcare through its intelligent diagnostics platform, which combines genomic testing, vast clinical data, and artificial intelligence.
Valued at a market cap today of $9.2 billion, Tempus AI stock has surged around 47% since its initial public offering in June 2024. However, TEM stock also trades 40% below all-time highs, which allows investors today to buy the dip.
So, let’s see if Tempus AI stock is undervalued right now.
Is Tempus AI stock a good buy in May 2025?
Tempus AI has established itself as one of the largest sequencers of cancer patients in the United States and has built connections with approximately 3,000 provider sites, giving it a significant presence across the U.S. hospital system.
It operates through three primary business segments. The genomics division accounted for about two-thirds of revenue last year and offers therapy selection tests for cancer patients alongside minimal residual disease (MRD) and inherited cancer screening capabilities. Tempus AI recently acquired Ambry Genetics for $600 million, strengthening its position in hereditary cancer testing.
Tempus’ second revenue stream comes from its data licensing business, where it has amassed nearly $1 billion in contract value (not recognized revenue) from pharmaceutical companies using de-identified patient data to improve drug development. This data combines comprehensive molecular information with longitudinal clinical records, offering pharmaceutical researchers insights that aren’t really available anywhere else.
The third segment focuses on AI applications, developing algorithms to improve patient outcomes across various disease areas. While currently representing a small portion of revenue, this division received a boost when Medicare recently approved reimbursement for its atrial fibrillation prediction algorithm.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Does Tempus AI Stock Look Undervalued?
Forecast
Based on the revenue growth chart, Tempus AI is projected to experience extraordinary growth over the next few years. The company’s revenue is expected to increase from $693 million in 2024 to $1.92 billion by 2027, representing a 177% growth over this period.
The year-over-year revenue growth rate projections show a compelling trajectory:
- 78% growth in 2025 (a significant acceleration)
- 25% growth in 2026
- 24% growth in 2027
This pattern suggests a substantial revenue acceleration in 2025, followed by a normalization to still-impressive growth rates of a bit over 20% annually in subsequent years.
This revenue growth is likely to be driven by:
- Expanding Clinical Applications: The company is broadening its AI capabilities beyond oncology into other therapeutic areas, including cardiology, neurology, and infectious diseases.
- Pharmaceutical Partnerships: Tempus continues to establish strategic collaborations with pharmaceutical companies seeking to leverage its data platform for clinical trials and drug development.
- Clinical Decision Support: The company’s AI-powered diagnostic and treatment recommendation tools are gaining adoption among healthcare providers seeking to improve patient outcomes.
- Healthcare Data Ecosystem: Tempus has built one of the most comprehensive clinical and molecular databases in healthcare, creating a powerful network effect as the dataset grows.
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Valuation Multiple
Tempus AI has historically traded at an average Enterprise Value/Revenue multiple (EV/Revenue) of 9x, as shown in the chart below. The stock has traded as high as 14 times forward revenue and is currently near the lower end of its average, at 7.5 times expected revenue.
This compression in the stock’s multiple presents a potential opportunity for investors.
Moreover, Tempus AI is soon expected to turn profitable. The company is expected to report an adjusted earnings-per-share of $0.90 in 2027.
So, let’s see how we can value Tempus AI stock.
Fair Value
Since we don’t have a fair P/E multiple to use for Tempus AI, we can just use expected revenue with an appropriate revenue multiple.
- Expected 2027 Revenue: $1.9 billion
- Forward EV/Revenue multiple: 6x
- Implied 2027 Enterprise Value: $11.4 billion
- Current Shares Outstanding: 173 million
- Implied stock price in two years: $66
With Tempus AI stock currently trading at $54, we can see that the upside potential for investors might be around 22% over the next two years, indicating annual returns of about 11%.
Keep in mind, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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What is Tempus AI’s Stock Price Target
The consensus Tempus AI ($TEM) stock price target is $61.56 as of April 2025, indicating a potential upside of 15% from the current price of $ 53.50.
This means that analysts also think Tempus AI stock has a touch of upside today:
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TEM Stock: Risks to Consider
While our valuation suggests the stock does have some upside, investors should be aware of several risks:
- Intense competition in the healthcare AI space
- Regulatory challenges related to AI in healthcare applications
- Potential privacy concerns with sensitive healthcare data
- The possibility that revenue growth may not translate to profitability as quickly as expected
- General market volatility affecting high-growth, pre-profit technology stocks
TIKR Takeaway
As precision medicine expands beyond oncology into areas like cardiology, immunology, and rare diseases, Tempus is positioned to leverage its vast data network and AI capabilities to transform how healthcare decisions are made across multiple therapeutic areas.
Tempus expects to reach profitability in 2025, ahead of its original 2026 target, thanks partly to the Ambry acquisition. It faces minimal impact from recent tariff discussions and sees growing adoption of its data by pharmaceutical companies despite industry budget pressures.
Is Tempus AI stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if the stock is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
