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On Thursday, Morgan Stanley (NYSE:MS) increased its price target on shares of Tempus AI Inc (NASDAQ:TEM) to $65, up from the previous target of $60, while maintaining an Overweight rating on the stock. The stock, currently trading at $63.1, has shown remarkable momentum with a 74% gain year-to-date and a 13% surge in the past week alone. InvestingPro analysis reveals several more key insights about Tempus AI’s performance and potential, with 7 additional ProTips available to subscribers. The revision follows Tempus AI’s first-quarter performance, which exceeded expectations due to higher volume and average selling price improvements as the company transitions to its xT-CDx system. The company maintains strong financial health with a current ratio of 2.29, indicating solid liquidity to support its growth initiatives. The early traction of the company’s minimal residual disease (MRD) testing is also seen as promising, with reimbursement anticipated by the end of the year. For detailed analysis of Tempus AI’s financial position and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
The firm’s confidence is further bolstered by a development contract with AstraZeneca (NASDAQ:AZN) and the Pathos foundation, which brings the total contract value (TCV) to over $1 billion. This agreement is viewed as a significant step that reduces the risk associated with unsigned data contributions that were assumed in the previous guidance. The company has demonstrated strong revenue growth of 30.38% over the last twelve months, though it currently operates at a loss with negative EBITDA of $653.76 million. Morgan Stanley analysts addressed queries regarding the modest increase in top-line guidance despite the AstraZeneca/Pathos news, clarifying that the initial forecast had already accounted for some deals that were unsigned at the time but expected to close within the year. The AstraZeneca/Pathos deal is seen as substantiating that part of the forecast.
The $200 million contract from the expanded partnership with AstraZeneca and Pathos is expected to drive medium-term growth in Tempus AI’s Data and Services business. Although the upfront fee payments from this deal are not anticipated to impact revenue, the partnership is projected to contribute approximately $25-30 million in the second half of 2025. Consequently, the $10 million raise in the overall guidance for the year is attributed primarily to the company’s strong performance in the first quarter.
In other recent news, Tempus AI Inc. reported its first-quarter 2025 earnings with a substantial 75.4% increase in revenue year-over-year, reaching $255.7 million, surpassing the forecast of $248.5 million. The company also reported an earnings per share (EPS) of -$0.24, slightly better than the anticipated -$0.26. Despite exceeding revenue expectations, Tempus AI’s stock faced a decline in trading. Tempus AI raised its full-year 2025 revenue guidance to $1.25 billion, projecting an 80% year-over-year growth. The company announced a significant three-year, $200 million data and modeling license agreement with AstraZeneca and Pathos to build the world’s largest foundation model in oncology. Analysts from firms like Morgan Stanley and Needham and Company expressed interest in the company’s strategic moves, with discussions around the potential for similar foundational model development deals with other pharmaceutical companies. The hereditary testing segment showed a promising 23% growth in unit sales, while the data and services revenue increased by 43% year-over-year. Tempus AI’s ongoing investments in AI and data infrastructure are aimed at achieving EBITDA positivity in 2025.
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