$Tempus AI(TEM)$ US economy doing too well (job growth, yields raise) and too bad (CPI potentially worse?) at the same time, contributing to market downturn (reduced interest rates cuts). Growth stocks suffer most, while defensive sectors (healthcare, utilities, etc.) become safer alternatives.
This places TEM in an awkard position. It is a growth stock in a defensive sector. The market downturn reduces present value of future earnings, leading to lower stock prices, while strong demand for healthcare provides buffer against cyclical risks.
Will TEM go beyond $40 in the next few months?
TEM has substantial cash buffer (roughly 500mil liquidity) as of Q3 2024 to ride through 12-18mths of market downturn, but it needs to reduce its cash burn (-190mil operating cash flow) and improve operational efficiency to maintain investor confidence.
TEM also has a total debt of ~471.55mil (short & long-term) and 877.65% debt-to-equity ratio. Given its negative operating income, it also has negative interest coverage. Uncertainty re: its financial leverage and management of debt obligation in a high-interest-rate environment.
Volatility in the next QE hinges on its cash flow and debt (and to lesser extent revenue growth).
If the next QE ain't good enough, time to hold for long. When everyone starts rotating into defensive sectors, TEM will fare much better than growth stocks in other sectors. ⏳️🚀
Modify on 2025-01-13 20:44
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