Shares of Teladoc Health (TDOC 0.90%) were jumping 2.2% as of 10:53 a.m. ET on Thursday after rising as much as 4.8% earlier in the day. The gain came on news that Amazon (AMZN 1.45%) plans to shut down its rival telehealth service, Amazon Care, by the end of 2022.
An internal memo written by Amazon Health Services lead Neil Lindsay revealed that the decision to close Amazon Care came after months of deliberations. Lindsay wrote that the company ultimately "determined that Amazon Care isn't the right long-term solution for our enterprise customers." He added that it wasn't "a complete enough offering for the large enterprise customers we have been targeting, and wasn't going to work long-term."
One of the frequent knocks against Teladoc is that it faces intensifying competition. Amazon's entrance into the telehealth market in 2021 with the nationwide launch of Amazon Care served as a prime example cited by critics.
Now, though, Amazon's decision to shutter Amazon Care seems to confirm that Teladoc's market position is stronger than many believed. The company already has a broad virtual care offering. Its customer base includes more than 50% of the Fortune 500.
Amazon Care's demise isn't enough to cause Teladoc's shares to skyrocket. There are other headwinds holding the telehealth stock back, especially its slowing growth.
However, investors are right to take note when a huge company like Amazon chooses to throw in the towel instead of attempting to directly compete against Teladoc. The virtual care leader continues to expand its offerings. This could further strengthen its competitive position.
The main prerequisite needed for Teladoc to rebound is an acceleration of its growth. It's possible that Amazon's decision could improve the chances that will happen.