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Investing.com -- TD Cowen downgraded Tempus AI to Hold from Buy, saying the stock looks fairly valued after a sharp rally that lifted its shares 174% this year and 15% since the end of September.
The brokerage said Tempus’ enterprise value-to-sales multiple expanded from about seven times at the end of the second quarter to roughly 11 times currently, despite little change in fundamentals.
It raised its price target to $88 from $72.
“Tempus has been the best-performing oncology diagnostics stock in our coverage” but its multiple expansion has outpaced its earnings growth, accd to TD Cowen.
While TD remains positive on Tempus’ AI-based data and genomics model, which links high-margin “Insights” revenue with a growing genomics business, the valuation now reflects those strengths.
There is continued solid performance from the genomics unit and stronger-than-expected results from the Ambry acquisition, but said those gains are already priced in.
Tempus’ data and insights division, which accounts for most of its growth, continues to expand at about 30% annually, supported by pharma licensing deals such as Pathos AI and AstraZeneca.
TD Cowen said it expects Tempus’ core genomics business to grow around 26% a year through 2027, broadly in line with peers, and its data segment to maintain faster growth. It now values Tempus at about eight times forward sales, consistent with the broader oncology diagnostics sector.
While we remain constructive on Tempus’ long-term model, the stock’s strong run leaves less room for upside, the analysts said.