TEM is Still Wildly Undervalued
$Tempus AI(TEM)$ is still wildly undervalued.
Here's how I think the business should be valued over the next 12 months:
DATA & APPLICATIONS
-> Annualized revenue based on Q2 is currently ~$410M. Growth at a similar rate into FY27 would put us at $525M.
-> This business has 73% gross margins so at 28% YoY growth and those margins it's putting up figures like a solid SaaS company.
-> $525M * 10x sales = $5.3B
-> $525M * 12x sales = $6.3B
DIAGNOSTICS
-> Generated $293.3M in Q2 alone which is $1.2B annualized. Growth at a similar rate gets us to $1.5B in FY27.
-> And plus,
$Tempus AI(TEM)$ recently received FDA approval on xT CDx test which brings tumor DNA portfolio under reimbursement pricing.
-> This adds another $200 in selling prices that management forecast to be ~$85M in incremental revenue.
-> That puts our FY27 revenue base closer to the $1.5B range.
-> $Guardant Health Inc.(GH)$ (closest peer) is trading at 13x sales today on ~35% CAGR for the next 2 years.
$Tempus AI(TEM)$ is likely growing at ~24% CAGR.
-> If we take a 10x multiple on this we have a potential $15B business here alone.
$6B + $15B -> $21B (vs $10B today).
Longer term my forecasts are even higher.
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