Investing.com -- TD Cowen reinstated coverage on Tempus AI with a "Buy" rating and raised its price target to $74 after the health-tech company completed its $600 million acquisition of Ambry Genetics.
The brokerage said the deal accelerates Tempus' path to profitability, with Ambry expected to generate more than $40 million in EBITDA in 2024. The acquisition also expands Tempus' database by integrating Ambry’s germline testing business, creating new product opportunities and potential synergies.
“The deal affords TEM profitable germline testing lab, offers opportunities to enhance TEM's existing products, expand into new areas&provides path to positive free cash flow, w/ the main drawback Ambry's slower growth,” analyst at TD said, highlighting a larger revenue base&attractive growth/margin expansion.
However, TD Cowen noted that Ambry's long-term revenue growth of about 20% per year is below Tempus' standalone growth rate, slightly diluting its overall expansion trajectory. The deal also brings integration and execution risks.
Ambry, a 25-year-old genetics testing firm, is expected to generate over $300 million in revenue this year, with growth boosted by market share gains following Invitae’s bankruptcy.
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