Amazon's (AMZN 3.43%) growth machine has slowed down -- significantly. Over the past five years, it has averaged a growth rate of over 22%, and that was with pandemic-driven demand giving it a big boost. In recent quarters, sales have often grown by less than 10% year over year.
The company needs a growth catalyst, and one industry that could offer it that the tech giant has been targeting of late is healthcare. Let's take a look at some of its latest efforts in that area.
Creating efficiencies for doctors
Amazon Web Services (AWS) is the company's cloud computing business, helping businesses store and share information online. One industry that AWS can help is healthcare, where it can add efficiency and make it easier to share and store information about patients.
In July, Amazon announced a new service: AWS HealthScribe. What it promises to do is automatically create notes from the conversations between patients and doctors. A key benefit of HealthScribe is that it can free up time for physicians by making the documentation process easier. It also allows patients to easily reference those conversations.
The service operates on a pay-as-you-go basis, so customers will only pay based on the amount of data processed. And patient data is protected. Amazon says the service is compliant with HIPAA standards.
A deepening involvement with healthcare
The tech giant is no stranger to healthcare. In 2018, it acquired online pharmacy PillPack. Two years later, it formally launched Amazon Pharmacy. Through the service, pharmacists are available on call 24/7 and Prime members can save up to 80% on medication. It also automatically calculates co-pays.
Earlier this year, Amazon broadened its healthcare footprint with its acquisition of primary care company One Medical. That deal came even as the tech giant was abandoning its telehealth service, Amazon Care, which closed at the end of last year.
Amazon's latest move to offer a new tool using artificial intelligence (AI) to automate note-taking is further proof that it's looking to the healthcare industry as a key growth opportunity.
Analysts from Grand View Research also see an opportunity for tech to transform the industry, projecting that the global healthcare IT market could grow at a compound annual rate of 17.9% through 2030. This includes the opportunities within managing electronic healthcare records, prescribing systems, and other areas where technology could help healthcare companies become more effective and efficient.
Is Amazon a buy?
Amazon already has a $1.4 trillion market capitalization, and by expanding its healthcare business, it can open up more opportunities to justify and potentially increase its valuation. The tech stock trades at a whopping 83 times estimated future profits. So unless investors are expecting lots more growth ahead, it can be hard to find a reason to be bullish about Amazon.
AI is a big growth opportunity for it and other tech companies, and finding uses for it in healthcare could be a great way for Amazon to add to its top line while also diversifying its revenue sources.
This latest news doesn't make Amazon a slam-dunk buy since its valuation is far from cheap. Plus, it's hard to estimate how much of an impact AWS HealthScribe could have on its bottom line. But it's an important development nonetheless, and one that investors should keep an eye on.
This isn't the tech company's first move into healthcare, and it likely won't be its last.
