Conventional wisdom. It's what we call a generally accepted belief or view about something. In many cases, conventional wisdom is spot on. But not always.

Investors sometimes believe something about a given stock that isn't necessarily true. I've suspected for a while that Teladoc Health (TDOC -1.52%) was a victim of misplaced conventional wisdom in one particular area. However, there hasn't been a great way to prove this suspicion -- until now. Amazon (AMZN -2.56%) just dispelled a big myth about Teladoc.

A parent and child looking at a monitor displaying a healthcare professional.

Image source: Getty Images.

Teladoc's Achilles' heel?

As recently as last week, I debated with one of my colleagues about the merits of investing in Teladoc stock. One of the points made in the bear case against Teladoc was that it has a "questionable moat." 

This view isn't an outlier. And it's not a new criticism. You can easily find articles dating back a few years that knock Teladoc for its lack of ability to fend off competitors. 

The idea does make sense to some extent. It's easy to connect healthcare providers to patients via video conferencing technology. Practically anyone could do it if they wanted to.

Several big companies have jumped into the telehealth market. They include health insurers Cigna and UnitedHealth Group, pharmacy giant CVS Health, and -- the biggest of them all -- Amazon. It's understandable why the conventional wisdom has been that Teladoc's Achilles' heel is a weak moat.

Amazon the myth-buster

But Amazon delivered stunning news this week. A leaked internal memo revealed that the company plans to shut down its Amazon Care telehealth business at the end of this year.

Amazon initially launched Amazon Care in 2019 for its Seattle area employees. It expanded the business to compete nationally in 2021. At the time, some viewed the move as a huge threat to Teladoc.

Why would Amazon throw in the towel so quickly in a promising growth market? Amazon Health Services lead Neil Lindsay wrote in a memo to Amazon Care employees, "Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn't going to work long-term."

Think about what Lindsay said. The world's fourth-largest publicly traded company based on market cap decided that it couldn't compete effectively in the virtual care market because it didn't have "a complete enough offering" for large customers.

Could Amazon have invested a massive amount to build out its telehealth services? Sure it could. The company decided, though, that it wasn't worth the effort.

Guess which telehealth provider does have "a complete enough offering" to attract big customers? Teladoc's customer base already includes more than half of the Fortune 500. The company also continues to expand its offerings, with the Primary 360 virtual primary care product still in its early stages.

Some might point to Amazon's plans to acquire One Medical as evidence that it really isn't giving up on competing against Teladoc. However, One Medical CEO Amir Dan Rubin noted in the Q1 conference call in May that his company is seeing a shift away from virtual visits to in-person visits. Telehealth certainly doesn't appear to be the main reason why Amazon wants to buy One Medical.

The definition of a moat is the ability of a business to fend off actual and potential rivals. Amazon is abandoning Amazon Care because the cost of building a telehealth service that could effectively compete against Teladoc wasn't worth it. It's pretty clear that Teladoc does indeed have a solid moat.

More than meets the eye

Teladoc Health has been a big loser for a while now. The telehealth stock has plunged 88% below its peak in early 2021. Teladoc no doubt faces some headwinds that contributed to this steep sell-off.

However, I think that there's more to Teladoc than meets the eye. The virtual care market opportunity is huge. Teladoc is the undisputed leader in this market. Maybe the company will fade away as many predict. But we've already seen this week that the conventional wisdom isn't always right.