In a year where little has gone right for telehealth firm Teladoc Health (NYSE:TDOC), a rival exiting the space gave some hope for TDOC stock, which moved up on Thursday morning. In an internal memo, Amazon (NASDAQ:AMZN) announced that it will shut down its telehealth service, Amazon Care. While Teladoc shareholders have reason to smile today, the underlying business faces severe challenges.
According to a CNBC report, Amazon will shutter its telehealth arm on Dec. 31. According to a company email, management decided that it wasn’t “the right long-term solution for our enterprise customers.” Further, Amazon Health Services lead Neil Lindsay provided clarifying information. “Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”
While a much-anticipated initiative, CNBC reports that ultimately, it wasn’t clear how much traction Amazon Care actually generated. Some of its corporate clients include Hilton Hotels (NYSE:HLT) and Silicon Laboratories (NASDAQ:SLAB).
With a major competitor out of the way, Barron’s notes that TDOC stock wasn’t the only ticker moving higher. Shares of Hims & Hers Health (NYSE:HIMS) and American Well (NYSE:AMWL) gained 1.4% and 4.4%, respectively, as of this writing.
Nevertheless, investors must consider several factors before making a decision on Teladoc Health.
TDOC Stock Intrigues But Longer-Term Headwinds Remain
At least one analyst anticipates optimism for Teladoc, suggesting that Amazon’s exit could lift TDOC stock and its ilk. Robert Simmons, an analyst at D.A. Davidson, initiated a “buy” rating for TDOC earlier this month, setting a price target of $45.
“We believe Teladoc has established itself as the leader in telehealth, with operational scale and a completeness of offerings that allow it to offer differentiated service to customers,” said Simmons.
“Covid created unprecedented tailwinds for the market, which turned into headwinds; we believe we are now at stable to growing penetration rates for telehealth, and that Teladoc is well-positioned to continue to lead the market’s growth and evolution,” Simmons added.
It’s an interesting take. However, the main concern is that TDOC stock is down almost 64% on a year to date basis. Presumably, it cannot thrive on the bad news of others. At some point, the underlying company must bring substantive developments of its own.
However, Covid-19 played a large role in Teladoc’s market success. With that same fear now faded into the background, TDOC stock may struggle without a fundamental catalyst. Keep in mind that shares have been plunging since a meteoric spike peaked in February 2021.
Why It Matters
Investors should also keep in mind that the monkeypox virus has spread to all 50 states, generating new fears. Therefore, it’s possible that TDOC stock could rise based on cynical relevance.
At the same time, public health officials note that the “current risk of getting monkeypox in the general public is very low.” Without an overwhelming push toward contactless medical exams, TDOC stock largely remains a high-risk, but potentially high-reward market idea.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.