Here's a story about a company doing something smart while its stock does something less exciting. Tempus AI Inc. (TEM) announced on Tuesday that it has expanded its strategic collaboration with pharmaceutical giant Merck & Co. Inc (MRK). It's a multi-year deal aimed at using artificial intelligence to speed up the discovery of precision medicine biomarkers—essentially, finding better ways to match the right drug to the right patient, especially in oncology.
This is the kind of news that should make investors nod approvingly. Tempus is leveraging its "extensive library of de-identified multimodal data" and its fancy Lens Platform, which the company says uses "one of the industry's largest GPU infrastructures" to crunch complex data. The goal is to help Merck find new biomarkers and understand why cancer cells sometimes become resistant to treatment. It's a solid, forward-looking expansion of an existing partnership.
And yet, Tempus shares were down about 1.56% to $52.48 on Tuesday. Sometimes the market just has other plans.
The broader market was having a rough day, with the S&P 500 and Nasdaq both trading lower. In fact, the previous trading session saw the S&P fall 1.78% and the Nasdaq drop 2.18%. So, Tempus's slide appears to be less about its new Merck deal and more about getting caught in the general downdraft. The stock is currently trading 9.8% below its 100-day simple moving average, which suggests some longer-term weakness, and it's hanging out closer to its 52-week lows than its highs.
From a technical standpoint, the picture is mixed. The Relative Strength Index (RSI) sits at 44.45, which is neutral territory—the stock isn't overbought or oversold. Meanwhile, the MACD indicator is below its signal line, hinting at some bearish pressure. Traders might be watching key resistance at $54.00 and support at $48.00.
What's interesting is that analysts, by and large, still like the story. The consensus rating is a Buy with an average price target of $74.31. That's a hefty premium to where the stock trades now. However, several analysts trimmed their targets in late February after Tempus reported earnings. JP Morgan moved to Neutral and lowered its target to $60. Needham and BTIG kept their Buy ratings but lowered their targets to $75 and $90, respectively.
Speaking of earnings, the last report in February showed the company is still in investment mode. It posted a loss of four cents per share, which was exactly what analysts expected. The revenue side was more encouraging: $367.21 million, which beat the Street estimate of $362.29 million and was up significantly from $200.68 million in the same period a year ago. Growth is clearly happening, even if profits aren't yet.
So, to sum up: Tempus is signing expanded deals with major partners to do cutting-edge work in AI and medicine. Its business is growing revenue nicely. Analysts think it's worth much more than its current price. But the stock is getting dragged down with everything else in a jittery market. Sometimes, that's just how it goes. The company is building something; the market, for the moment, is looking elsewhere.
