Amazon (NASDAQ:AMZN)
Sometimes, investors have preconceived notions about a stock that aren’t founded in reality. I’ve always thought conventional wisdom about Teladoc Health (NYSE:TDOC) is wrong. But until now, there hasn’t been a great way to confirm this suspicion. The latest lie regarding Teladoc has been busted by Amazon (NASDAQ:AMZN).
What is Teladoc’s Flaw?
Last week, I had a discussion with a coworker regarding whether or not it would be wise to buy Teladoc stock. The bear case against Teladoc includes allegations that the company has a “questionable moat.”
It’s not an extreme position to hold this opinion. It’s hardly a fresh criticism, either. Articles criticizing Teladoc’s inability to fend off competitors may be found with little effort going back a few years.
The concept is not entirely ridiculous. With the help of video conferencing, it’s simple to set up a connection between doctors and patients. If one really wanted to, they could do it.
The telehealth industry has recently seen the entrance of several large corporations. Some examples are the healthcare providers Cigna and UnitedHealth Group, the pharmacy chain CVS Health, and the largest of them all, Amazon. It makes sense that the popular thinking holds that Teladoc’s moat is its weak point.
The Truth About Amazon: Debunked Myths
However, this week Amazon (NASDAQ:AMZN) revealed some shocking information. According to a leaked internal letter, Amazon Care, the company’s telemedicine division, will be discontinued at the end of the year.
Amazon Care was introduced in 2019 for Amazon employees in the Seattle area. In 2021, it enabled the company to compete on a national scale. As it happened, some people saw this as a significant danger to Teladoc.
Why would Amazon (NASDAQ:AMZN) give up on a rapidly expanding market like that? Although our enrolled members have appreciated many features of Amazon Care, it is not a complete enough product for the significant business customers we have been targeting and wasn’t going to work long-term,” Amazon Health Services lead Neil Lindsay wrote in a memo to Amazon Care workers.
Do some reflecting on Lindsay’s words. Despite being the fourth largest public corporation in the world by market valuation, the company has decided it cannot compete successfully in the virtual care industry due to its lack of a “comprehensive enough product” for significant customers.
Was it possible for Amazon (NASDAQ:AMZN) to spend significantly on expanding its telehealth services? Of course, it could. However, management concluded that pursuing this course of action would be futile.
If you’re looking for a telehealth company that has “a full enough offering” to entice significant clients, I’ll give you one hint: it’s not that. Over half of the Fortune 500 are already Teladoc customers. Primary 360, the business’s virtual primary care product, is only in its infancy, but it’s just one example of how the company is constantly developing new services.
One may argue that Amazon (NASDAQ:AMZN) intention to purchase One Medical shows the company isn’t giving up on competing with Teladoc. However, One Medical CEO Amir Dan Rubin mentioned a trend away from virtual visits and toward in-person visits during the company’s Q1 conference call in May. It’s unclear that telehealth is a secondary consideration for Amazon’s interest in acquiring One Medical.
A moat is a company’s inherent advantage over existing and potential competitors. To save money, Amazon has decided to end Amazon Care, a telemedicine service designed to compete with Teladoc. It is easy to see that Teladoc enjoys a vast competitive advantage.
A Lot More Going On Than Meets The Eye.
For a long time now, Teladoc Health has been a significant loser. Stock in telehealth companies has fallen 88% from their early 2021 high. Teladoc faces headwinds, which likely had a role in this severe sell-off.
On the other hand, I believe that Teladoc has more to offer than initially meets the eye. The potential for growth in the field of virtual healthcare is enormous. Currently, no company can compete with Teladoc. Some have speculated that the company will eventually fail. This week has shown us that the prevailing opinion isn’t always correct.
Featured Image: Megapixl @Kenishirotie
Author Shariq Khan 
