Please ensure Javascript is enabled for purposes of website accessibility

What Does the Launch of Amazon Clinic Mean for Teladoc?

By David Jagielski – Nov 23, 2022 at 9:15AM

Key Points

  • Amazon has announced plans to launch a new healthcare service, Amazon Clinic.
  • This news comes after the shutdown of Amazon Care, its previous telehealth business.
  • The company will work with other telehealth providers, which may include Teladoc.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The tech giant is making another attempt to get into the telehealth business, but this time it's taking a different approach.

Teladoc Health (TDOC 0.69%) investors may have breathed a sigh of relief this year when they learned that tech giant Amazon (AMZN -1.44%) was shutting down its telehealth service, Amazon Care.

But given its acquisition of PillPack in 2018, and the announcement earlier this year that it plans to acquire primary care provider 1Life Healthcare (which does business as One Medical), the odds were good that Amazon would be looking for ways to expand further into healthcare, and perhaps into virtual care again.

That became a reality when on Nov. 15, Amazon revealed its plans for Amazon Clinic, a virtual care service that will be available in 32 states initially. Should Teladoc investors be concerned, or could this end up being a good thing for the telehealth stock?

Helping connect patients to third-party providers

A key difference between Amazon Care and Amazon Clinic is that while the former sought to convince companies to offer Amazon's own telehealth services to their employees, the latter will simply connect people to third-party telehealth providers. Patients will be able to select from a list of 20-plus common conditions and then select a telehealth provider to use.

Unlike many telehealth services that feature video for virtual face-to-face meetings with doctors, Amazon Clinic is a message-based service, so patients wouldn't get the same experience as they would by simply reaching out to a telehealth provider themselves.

My sense is that Amazon's long-term strategy here could involve the acquisition of a telehealth provider. And by seeing which telehealth providers people select, and which ones are more popular for various conditions, the company could collect valuable data to assess which one would be the best to acquire. 

Why this could benefit Teladoc Health

In the press release announcing the new service, Amazon didn't specify which telehealth providers it would work with so far, only that each of them "has gone through rigorous clinical quality and customer experience evaluations by Amazon's clinical leadership team."

Odds are, however, that Teladoc will be among them as the company is often rated highly for customer satisfaction. Last year, it ranked first for customer satisfaction based on a survey J.D. Power conducted. Earlier this year, Amazon also announced that people could access Teladoc's telehealth services using its voice assistant, Alexa.

Amazon Clinic says it doesn't accept insurance yet. That's another area where Teladoc could provide value as it charges people without insurance as little as $75 per visit.

Assuming that it is one of Amazon's providers, Teladoc could see more traffic. And a stronger relationship with Amazon certainly doesn't hurt either as it could lead to a potential investment or an acquisition down the road.

Teladoc could make for a great buy right now

Despite economic headwinds impacting affordability, Teladoc's business has been resilient, with sales up more than 17% year over year in the third quarter to more than $611 million.

The company is a top telehealth provider and the launch of Amazon Clinic could be a net positive. The healthcare stock is down by around 70% year to date, and trades at just 2 times sales, which is its lowest valuation ever by that metric.

But with fundamentals that remain strong, plus a possibly stronger relationship with Amazon and the potential of an acquisition bid from the tech giant, there is potentially lots of upside for the stock right now.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has positions in Teladoc Health. The Motley Fool has positions in and recommends Amazon and Teladoc Health. The Motley Fool has a disclosure policy.

Stocks Mentioned

Teladoc Health Stock Quote
Teladoc Health
TDOC
$29.20 (0.69%) $0.20
Amazon.com Stock Quote
Amazon.com
AMZN
$94.13 (-1.44%) $-1.37
1Life Healthcare Stock Quote
1Life Healthcare
ONEM
$16.90 (-0.47%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.