This writer has been compiling a list of potential stocks to buy for his portfolio in 2025. Here’s one that’s dropped 50% since mid-November!
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With the New Year upon us, I’ve been drawing up ideas for stocks to buy for my portfolio. Here’s one of them.
The investing theme of 2024 was undoubtedly artificial intelligence (AI). This revolutionary technology has captured the public’s imagination in ways not seen since the birth of the internet.
Nvidia has been the standout winner so far, with its stock up 742% following the release of ChatGPT in November 2022. Shares of AI software firm Palantir Technologies have done even better — up nearly 1,000% over the same period!
However, there are likely to be more big AI winners as the technology improves and is applied to other areas. Tempus AI (NASDAQ: TEM) might just be one of those.
Google-backed Tempus owns the world’s largest library of clinical and genomic data, including over 6m patient records. It specialises in using AI and data analytics to advance precision medicine, particularly in oncology, by making sense of these massive unstructured datasets.
Physicians and researchers can use its AI-driven insights to personalise patient care and speed up drug development. The firm’s mission is “to help make sure patients are on the right drug at the right time“.
Scottish Mortgage Investment Trust is incredibly bullish on the company. Its portfolio director recently wrote: “Tempus sits at the intersection of two exciting trends — genomic profiling and artificial intelligence-driven health data…Looking forward, we maintain a high conviction in its ability to offer extreme long-term returns, by using AI to transform cancer care.”
The firm is growing strongly. In Q3, revenue increased by 33% year on year to $181m. For the full year, management expects approximately $700m in revenue, which would represent 32% growth.
Founder and CEO Eric Lefkofsky commented: “The overall business performed well in the quarter, as demonstrated by accelerating volume growth in our genomics business and accelerating revenue growth in our data and services business.”
However, Tempus is not yet profitable, and recorded a net loss of $75.8m in Q3. Investing in a loss-making business would certainly add risk for me.
Also, the firm announced the acquisition of Ambry Genetics, a leader in genetic testing. This was for $375m in cash ($300m of this financed via debt) and $225m in shares. It expects Ambry to generate over $300m in revenue and generate more than $40m in EBITDA for 2024.
Debt adds further risk, even though Tempus should still have around $350m in cash following this acquisition.
Looking ahead, analysts reckon the global market size of AI in oncology could grow from $891m in 2022 to $10.7bn in 2032. Tempus is a leader in this area, working with over 200 healthcare companies, including AstraZeneca and GSK.
In early 2024, Nvidia CEO Jensen Huang said: “Where do I think the next amazing revolution is going to come? There’s no question that digital biology is going to be it.”
Digital biology is the fusion of AI, big data, and healthcare. Therefore, Tempus looks well-positioned for strong long-term growth.
The share price has crashed 50% since Donald Trump nominated Robert F Kennedy Jr to become health secretary. That looks like a massive overreaction to me, and I’m considering taking advantage of the dip.
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.
Ben McPoland has positions in AstraZeneca Plc and Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended AstraZeneca Plc, GSK, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in. Tax treatment depends on your individual circumstances and may be subject to future change. The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice.
Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
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