What happened

Shares of Teladoc Health (TDOC -0.84%) had tumbling 7% as of 12:06 p.m. EDT on Wednesday. The decline came after Amazon (AMZN -0.55%) announced plans to roll out its Amazon Care telehealth service to its employees throughout the U.S. this summer. Amazon also intends to make the service available to other employers later in 2021. In addition, Deutsche Bank lowered its price target for Teladoc to $226 from $263.

So what

This move by Amazon was expected. The internet giant first introduced Amazon Care to its employees in the Seattle area a couple of years ago. Even back then, industry observers predicted that the company was dipping its toes in the water in anticipation of eventually jumping all the way into the telehealth services market.

How much impact could Amazon Care have on Teladoc? It's too early to tell. Amazon certainly has the financial resources to commit to its telehealth launch to make it successful. But Teladoc enjoys a strong early-mover advantage with over 40% of Fortune 500 companies using its services.

Man holding a smartphone showing a physician with a stethoscope

Image source: Getty Images.

Competition in the telehealth market was already increasing before Amazon's announcement. But Teladoc continues to land major new accounts. CEO Jason Gorevic said in the company's fourth-quarter conference call that Teladoc's sales pipeline "is growing actually faster than we've seen in previous years." 

Now what

Arguably the more important thing to watch with Teladoc than Amazon's entry into the telehealth market is what happens to virtual-care visits as the pandemic comes to an end. The healthcare stock skyrocketed last year as lockdowns drove consumers to use telehealth like never before.

Teladoc thinks that its momentum will continue even after the pandemic is over. The company's performance throughout the rest of this year should give investors a good sense on whether that optimism is well founded.