Wall Street analysts love this recent IPO that’s an AI play in the health care sector

Avatar photo

by CNBC
2024-07-09

See all articles
Wall Street analysts love this recent IPO that’s an AI play in the health care sector

Wall Street analysts are bullish on recently-launched health care technology stock Tempus AI . On Tuesday, analysts across the Street initiated coverage of the stock, with most assigning it either a buy or overweight rating. Bank of America analyst Michael Ryskin praised the company for its artificial intelligence capabilities in the health care field. "Tempus provides AI-enabled precision medicine, bringing the power of advanced technology to healthcare and diagnostics. By combining a patient's molecular, clinical, and imaging data with its AI platform, Tempus delivers personalized therapy decisions," he wrote. Tempus AI debuted at the Nasdaq on June 14, closing at $40 after pricing its IPO at $37. Last month, investment management firm SoftBank announced it had invested around $200 million in Tempus before its Nasdaq listing. Since its debut, Tempus AI stock has slipped 10% from its IPO price. But Bank of America's Ryskin has set a price target of $41 for the stock, 23% above Monday's close. He has a buy rating on shares. TEM YTD mountain TEM While the stock is trading at a "premium valuation," Ryskin justified the price by pointing out Tempus' "strong financial profile, the hybrid nature of its business (both healthcare and tech), and the lack of pureplay comps." The company has a total addressable market of at least $70 billion and has already showed its ability to scale up in a relatively short period of time, he said. Other analysts are even more bullish than Ryskin. JPMorgan's Rachel Vatnsdal initiated the stock with an overweight rating and a $42 price target, while both William Blair and Morgan Stanley also placed outperform-equivalent ratings on Tempus AI with a target of $44. "We see TEM's valuation discount of Precision Oncology peers as unwarranted, and we expect the valuation gap to close," wrote Morgan Stanley analyst Tejas Savant. "We anticipate that TEM will begin to trade at a multiple that is more in line with the Data/AI group as the results of their AI-driven strategy become increasingly appreciated." Elsewhere on the Street, analysts at Stifel, Needham, Loop Capital and TD Cowen initiated the stock at a buy- or overweight-equivalent rating. The financial firms respectively set price targets of $45, $47, $48 and $50. "Biopharma customers pay TEM for its large multimodal (genomics, EMR, path, imaging) data to enable more effective R & D," TD Cowen analyst Dan Brennan wrote. "What's different is the database size (10-50x > peers & the largest public resource, TCGA) & TEM's early strategic focus on AI/analytics to leverage the data, yielding ~$170M in high margin sales & a big backlog."

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Exclusive Capital communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.

Read our detailed Marketing Communication Disclaimer

SHARE