Valued at a market cap of $9.2 billion, Tempus AI (TEM) stock went public in June 2024. Since its initial public offering, TEM stock has returned over 35% to shareholders. However, the stock fell close to 20% on May 28 after Spruce Point Capital initiated a short position in the artificial intelligence company. 

Tempus AI is a Chicago-based healthcare technology company that provides genetic sequencing, molecular testing, and diagnostic services to healthcare providers. It offers data analytics platforms, clinical trial matching services, and algorithmic tests in oncology. Tempus AI aims to leverage artificial intelligence to advance precision medicine and the development of cancer treatments.

Let’s see if TEM stock can recover from the short seller’s scathing report.

Why Is Spruce Point Bearish on Tempus AI Stock?

Spruce Point Capital Management alleged that Tempus AI is engaged in “aggressive” accounting practices and relies on weakening partnerships to mask operational struggles. The research firm also questioned the company’s AI credentials. In the report, Spruce Point stated that, despite rebranding as Tempus AI before its initial public offering (IPO), artificial intelligence applications generated only $12.4 million, or 2% of total revenue, in 2024. This alleged disconnect raises concerns about the company’s positioning in the competitive AI healthcare market.

The short seller also took issue with founder Eric Lefkofsky, whose previous ventures, including Groupon (GRPN) and Echo Global Logistics, delivered disappointing returns to public shareholders. Groupon’s stock has declined by nearly 95% since its IPO.

The report raises concerns about a joint venture with SoftBank (SFTBY). As per the agreement, both companies contributed approximately $95 million each, with Tempus recognizing revenue from the partnership over multiple years.

Additional concerns center on Tempus’s partnership with pharmaceutical giant AstraZeneca (AZN). Spruce Point suggests the relationship has actually weakened, evidenced by AstraZeneca’s decision not to exercise warrants to purchase TEM stock.

According to TipRanks, Tempus AI rejected the allegations as “riddled with hypotheticals and inaccuracies.” 

Is Tempus AI Stock a Good Buy?

Tempus AI delivered impressive first-quarter results, with revenue surging 75.4% year-over-year to $255.7 million, demonstrating robust growth across its healthcare technology platform. The Chicago-based company's genomics division led performance with $193.8 million in revenue, representing 89% growth, while its data and services segment grew 43% to $61.9 million.

Its oncology testing business expanded 31%, with 20% volume growth, while the recently acquired Ambry Genetics hereditary testing unit contributed $63.5 million, representing 23% unit growth. Gross profit nearly doubled to $155.2 million, and adjusted EBITDA losses narrowed from negative $43.9 million to negative $16.2 million year-over-year.

Management has raised its full-year 2025 revenue guidance to $1.25 billion, indicating year-over-year growth of 80%, following the announcement of a major strategic partnership. Tempus AI secured a three-year, $200 million data licensing agreement with AstraZeneca and Pathos AI to develop oncology foundation models, bringing total remaining contract value above $1 billion.

CEO Eric Lefkofsky emphasized progress toward achieving adjusted EBITDA positivity in its tenth year of operations, positioning Tempus favorably among peers that are still losing hundreds of millions annually. The partnership validates Tempus’s data assets, which comprise over 300 petabytes of multimodal patient data linked to clinical outcomes.

What Is the Target Price for TEM Stock?

Analysts expect Tempus AI to increase revenue from $693.4 million in 2024 to $2.5 billion in 2029. Comparatively, adjusted earnings per share are forecast to increase to $1.69 in 2029, compared to a loss of $1.58 per share in 2024. 

If TEM stock is priced at 60 times forward earnings, which is not too high given its growth profile, it will trade around $100 in May 2029, indicating upside potential of over 95% from current levels. 

Out of the 12 analysts covering Tempus AI stock, four recommend “Strong Buy,” two recommend “Moderate Buy,” and six recommend “Hold.” The average target price for TEM stock is $65, more than 20% above the current price.