Amazon (AMZN 1.71%) is no stranger to making big moves. Acquisitions are never too far away from the tech giant. And in recent years, one industry that it has been focusing on is healthcare. Earlier this year, it announced the closing of its deal to acquire primary care company One Medical.

Although it shut down its telehealth business last year, Amazon Care, that's a logical area for Amazon to prioritize next. I would be surprised if it didn't make a big telehealth acquisition within the next 12 months.

Telehealth acquisition on the horizon?

Telehealth companies have been struggling in recent years as growing competition and a lack of profitability have kept investors hesitant about many businesses within the industry.

For Amazon, however, that presents an attractive opportunity as valuations are low for many top telehealth companies, including Teladoc Health, Hims & Hers, and American Well (better known as Amwell). Amazon could get a lot of bang for its buck as these stocks are trading at incredibly low price-to-sales multiples:

TDOC PS Ratio Chart

TDOC PS Ratio data by YCharts

Here's how they compare in terms of valuation, sales, and their bottom lines:

Company Market Cap 2022 Sales 2022 Net Loss
Teladoc Health $4.3 billion $2.4 billion -$13.7 billion
Hims & Hers Health $1.7 billion $526.9 million -$65.7 million
Amwell $575.8 million $277.2 million -$270.4 million

Data source: 

There are multiple angles Amazon could pursue with each of these companies. Amwell is working on a system, Converge, which aims to be a hub for third-party telehealth apps and services. Hims & Hers focuses on sensitive areas of healthcare, including erectile dysfunction and hair loss.

Teladoc, meanwhile, offers a larger, more comprehensive and diverse option overall. While it incurred massive net losses last year, that was mainly due to billions in writedowns stemming from its 2020 acquisition of chronic care company Livongo for $18.5 billion. It would, however, still provide Amazon with one of the best options to make a big move in telehealth; this year, Teladoc projects that the number of telehealth visits through its platform could top 5 million.

Telehealth would be a natural extension

Regardless of which company Amazon might go with if it made a purchase, telehealth is the one thing that appears to be missing from its healthcare operations. It has an online pharmacy, a primary care business, and it even has Amazon Clinic, which connects patients to telemedicine companies.

But rather than simply connecting patients to those types of companies, it would make more sense for Amazon to own one of them. Although it failed with Amazon Care to develop its own telehealth business, given its vast resources, an easier option would be to just acquire an established business, whether it's Teladoc, Hims & Hers, Amwell, or another company altogether.

Amazon Clinic could be Amazon's way of gauging the relative interest of different telehealth providers and determining which might be the best one to pursue. A data-driven company, Amazon has recently rolled out Amazon Clinic on a nationwide basis, and as it collects more information about the demand for different telehealth services, it may only be a matter of time before it has the data it needs to make a sound decision.

Should you buy Amazon stock?

Amazon is a dominant tech company, but the big drawback is that with a $1.4 trillion valuation, its price-to-earnings multiple, even based on estimated future profits, is a whopping 87. That's a hefty premium for the business. In its second-quarter earnings results, net sales of $134.4 billion were up 11% for the period ending June 30. That's not a strong-enough growth rate to justify that type of price tag.

In the long run, healthcare could present a huge opportunity for the business to get even bigger and for its growth to accelerate. But Amazon has been down this path before, getting into a new industry with its acquisition of Whole Foods in 2017. And in the end, its bread and butter remains e-commerce and Amazon Web Services, its cloud business.

Even if it does acquire a telehealth company, healthcare is still an emerging opportunity for Amazon that's in the early innings. Investors should watch for Amazon to make more moves into healthcare, but unless it makes a massive acquisition in the tens of billions of dollars, it likely won't be a huge part of its business in the near future.

Amazon is worth keeping an eye on and putting on a watch list, particularly as it goes deeper into healthcare, but given its sky-high valuation and modest growth, I wouldn't rush to buy the stock right now.