It isn't easy to remain at the top in an innovative new field. And that's why investors listen closely when telemedicine leader Teladoc (TDOC -1.75%) talks about its latest contract wins, especially as rivals have multiplied in the market. One particular concern has been Amazon (AMZN -2.46%). After all, the trillion-dollar company has plenty of resources to conquer new territory.
But instead of looking at Amazon as a rival right now, we can look at the company as the bearer of good news. The company recently made a move that tells us three very positive things about Teladoc and its spot in the telemedicine market. Let's find out more.
Shutting down Amazon Care
Last month, Amazon said it plans on shutting down its Amazon Care business. This business offers both in-person and virtual medical visits. But it launched as a telemedicine player, and that remains its core operation.
At the same time, Amazon plans to buy One Medical -- an established provider of in-person and virtual medical visits. One Medical's hybrid solution puts a lot of emphasis on its physical network of doctors' offices. It's partnered with more than 125 locations nationwide in the U.S.
Now, let's get to the great news for Teladoc. The first element is this: It may not be easy for rivals to build up a service model that will compete with that of Teladoc. Amazon said that Amazon Care's service wasn't "complete enough" to sign on the type of corporate clients it aimed to attract. Amazon decided to leave the business instead of investing more resources into it.
If Amazon made that observation, it's possible other rivals today or down the road may run into the same problem. This means it probably won't be easy to unseat Teladoc.
Right now, Teladoc works with more than half of Fortune 500 companies. And at the start of the third quarter, Teladoc said it had double the number of multi-million-dollar contracts in the pipeline compared to a year ago. So, worries about competition nipping at the heels of Teladoc might be overdone.
A complete service
Here's the second thing Amazon's news tells us: Amazon noted that companies are looking for a complete service offering. Teladoc's focus has been on exactly that element. The company aims to offer "whole person" care. It provides primary care and doctors covering more than 450 specialties.
Teladoc also has strengths in mental health and the management of chronic conditions. So, Amazon's experience indicates Teladoc has what many corporate clients are looking for.
Now let's get to the third bit of good news. Amazon's purchase of One Medical signals its focus will be on a hybrid offering of in-person and virtual medical visits. Teladoc focuses on telemedicine only.
One Medical's and Teladoc's businesses overlap to some degree. But they aren't in direct competition. A client who wants a complete telemedicine offering may be more likely to choose Teladoc. And a customer looking for some in-person visits might lean toward a One Medical contract.
Of course, Teladoc faces other rivals focusing on the telemedicine-only space. But they likely represent less of a threat than Amazon -- a company with massive resources.
Does all of this make Teladoc a buy?
Teladoc has struggled in recent times. It announced two billion-dollar non-cash goodwill impairment charges this year. They were linked to its acquisition of chronic care specialist Livongo. Investors have also shied away from the stock amid worries about the company's ability to generate a profit. And a tumbling stock price has added to investors' reticence.
Right now might be too early to get in on the Teladoc story if you're a cautious investor. You might prefer waiting for signs of progress in contract wins and revenue. But aggressive investors may want to scoop up shares of this stock now -- while it trades at only 2.25 times sales. That's around its lowest ever.
The latest move by Amazon signals that Teladoc has what it takes to dominate in telemedicine over the long term. If the company can make progress toward profitability, an investment in the stock may pay off over time.
