Amazon Triggers a “Buy” Signal for this Mega-Trend
Dear Wall Street Daily Reader,
In case you missed the news, Amazon.com, Inc. (AMZN) has officially set its sights on a new market to dominate — telehealth.
What started out as an “in-house” benefit strictly for its own employees is now going nationwide. And it took just 18 months.
“Amazon is not playing around when it comes to telehealth,” says Matt Wolf, a senior health care analyst at RSM. “They have the platform, the analytics, the scalability, and the brand recognition.”
And starting this summer, per Amazon’s announcement, the company will provide “millions of individuals and families immediate access to high-quality medical care and advice—24 hours a day, 365 days a year.”
We couldn’t ask for a more glaring “buy” signal on the telehealth mega-trend.
But that doesn’t mean you should rush out to buy Amazon’s stock to profit from it.
Let me explain…
Focus on Telehealth Takeover Targets
During my TD Ameritrade appearance this week (replay here), I said that Amazon and Apple Inc. (AAPL) are the two FAANG stocks that every investor should own.
But when it comes to the burgeoning telehealth market, it’s not my favorite way to play the trend.
Why? It’s simple. Amazon doesn’t offer pure exposure to it.
At this stage of a new trend, in order to maximize our gains, we need to invest in smaller “pure-play” companies that are likely acquisition candidates for the big players like Amazon and Teladoc Health, Inc. (TDOC).
That being said, Amazon’s entrance is instructive…
Tech Platform Trumps All
By that I mean, Amazon’s rapid expansion into telehealth underscores the key to success: leveraging a technology platform. That’s the only way to scale and profit from a traditionally margin-poor industry like healthcare.
And no company possesses a more robust and adaptable platform than Amazon to penetrate any market. High- or low-margin.
So it stands to reason that, if we can find small- or micro-cap companies with similarly robust and scalable telehealth technology platforms, they’ll quickly gain market share and profits — and ultimately attract takeover offers.
Make no mistake — the trend is your friend when it comes to telehealth. I’ll share some more stats in a moment to prove it.
The key takeaway right now is simply this:
Investing with massive tailwinds ensures just about every small stock in the telehealth sector will appreciate handsomely in the quarters and years ahead.
So consider this your wake-up call to bet on it!
Now, let me give you some additional stats about this trend…
Forced Adoption Strikes Again
For many industries, the pandemic stopped their businesses in their tracks.
But for telehealth services, it catalyzed a massive and enduring growth trajectory.
Consider: Nearly 50% of U.S. physicians now report treating patients via telemedicine, a major increase from the 18% reported in 2018, according to Merrit Hawkins surveys.
And yet, we’re just scratching the surface.
More specifically, the global telemedicine market is expected to increase nearly 4x by 2026. Longer term, it represents a $600 billion market, especially if we factor in a major shift to online delivery and fulfillment of prescriptions.
For clarity’s sake, the terms telehealth, telemedicine, and e-health have nuances when used legally, but for consumers, they’re used interchangeably to refer to health care provided by a professional in a non-face-to-face manner. That can include a phone call, email, text, video visit, or even a video email.
Some might argue that necessity is entirely behind the surge in telehealth services. I disagree. We’ve been laying the groundwork for a transition to virtual care for decades. Healthcare providers and consumers simply needed to be forced to realize its benefits to reach a tipping point of adoption.
We got it with the Covid-19 pandemic, and there’s no turning back now. I’m not the only believer here, mind you.
- “I can’t imagine going back,” said Seema Verma, administrator of the Centers for Medicare and Medicaid Services. “People recognize the value of this, so it seems like it would not be a good thing to force our beneficiaries to go back to in-person visits.”
- “More physicians than ever have recognized digital health tools as an advantage for driving efficiency and safety in health care,” said Meg Barron, the American Medical Association’s vice president of digital innovation.
In other words, telehealth represents a burgeoning trend with serious advantages, and in turn, staying power. Even government and top industry officials recognize it and support it.
I’m convinced this quote from one industry insider sums up the opportunity best for investors:
“The stage of the telemedicine industry today is reminiscent of the beginning of the e-Commerce era. There were many winners and losers with e-commerce, but the biggest winners were those who made the biggest investments in customer acquisition, customer care, and market share, like Amazon and eBay.”
The only critical factor I’d add to the list, as I noted earlier, is a robust technology platform to enable a telehealth company to scale rapidly and profitably.
We’re Following the Smart Money, Too
As I’ve shared ad nauseum here, the formula for making the most profits as a trend trader is to invest early. And arguably, there are no better early investors than venture capitalists.
And guess what? They’re plowing money hand over fist into the telehealth industry right now. A record amount in the third quarter, in fact. Take a look:
So from a timing perspective, although it might seem too late, it’s actually early and prime for investing.
Put another way, the market for telehealth is still massively underpenetrated.
Case in point: The leading telehealth provider Teladoc expects to provide 10 million visits in the U.S. in the coming year. Yet, that barely scratches the surface of the 850 million outpatient visits, plus 300 million additional mental health specific visits each year in the country, according to Cowen analysts.
In case you don’t have a calculator handy, that works out to less than 1% penetration for telehealth.
Like I said, we’re early here, with almost all the growth still ahead of us.
So what are you waiting for to invest?
Ahead of the tape,
Editor and Founder, Trend Trader Daily