Does Amazon’s latest healthcare move make the stock a buy?

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This article was originally published on All figures are in US dollars unless otherwise noted.

It is clear that Amazon (NASDAQ:AMZN) wants to make a name for itself in the healthcare world. The e-commerce giant launched a pharmacy service two years ago. And the company is trying to break into telemedicine, though it hasn’t been easy. Amazon is shutting down its own Amazon Care service and is in the process of buying it 1Life Healthcare (NASDAQ:ONEM)better known as One Medical – a provider of in-person and virtual care.

But Amazon doesn’t stop there. The latest news is the creation of the Amazon Clinic. This is an online service that lets you connect with doctors — and get answers and prescriptions — for a variety of minor issues.

Let’s take a closer look.

An eldorado

Telemedicine is a kind of Eldorado for gamers and potential gamers. According to Polaris Market Research, the U.S. market is expected to grow at a compound annual growth rate of more than 15% to nearly $25.9 billion by 2027. The competition is high. And even a company with Amazon’s resources will likely struggle to beat a market leader like Amazon Teladoc health.

But Amazon’s latest move could give it an edge in a niche market. Teladoc and others sell complete health plans to companies or individuals. But Amazon Clinic is not a plan: it works like an online clinic – and anyone can use it.

If you’ve ever waited for hours in a walk-in clinic, you probably understand the potential of Amazon’s newest healthcare venture. Instead of going to an in-person clinic when you have a minor problem like sinusitis or conjunctivitis, fill out a questionnaire on Amazon about your symptoms. It then connects you to a doctor who sends you a treatment plan.

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The service is not insured. The price varies depending on the state you live in and the clinic you choose. For example, a conjunctivitis consultation at a Florida clinic costs $30 to $35 on the platform.

The Amazon Clinic is certainly an easier alternative than waiting for treatment in a crowded walk-in clinic. So the service has the potential to fill a need – and become successful.

Does this make Amazon a purchase? First, let’s answer another question: Will Amazon Clinic make Amazon a major healthcare player? That’s unlikely.

A niche market

While this looks like a positive move for Amazon, we’re talking about a niche. Earning opportunities are limited. And the deal won’t necessarily lead patients to Amazon Pharmacy — the prescriptions can be redeemed anywhere.

Therefore, I would not buy Amazon stock for this move. I wouldn’t even buy shares in the company’s plan to grow in the healthcare market because it’s far too early to predict whether Amazon can lead the way.

The company has already stumbled twice. As I mentioned before, Amazon Care will be closing at the end of this year. And last year it ended a healthcare joint venture with Berkshire Hathaway and JPMorgan Chase.

But notice that I actually want Buy shares in Amazon today. I would buy them for their long-term growth potential in e-commerce and cloud computing rather than their healthcare efforts.

Right now, higher inflation and general economic woes are weighing on these companies. But these are temporary problems. In the long run, Amazon has the market share and resources to be successful.

Today, shares trade at 1.9 times sales. This is roughly the lowest level since around 2015.

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Amazon’s healthcare ambitions are something to keep an eye on. But the company’s two main businesses make the stock a steal at today’s levels.

This article was originally published on All figures are in US dollars unless otherwise noted.