After months of waiting, Amazon.com($(AMZN)$0.15%)now owns MGM. The $8.5 billion deal closed last week, giving the internet giant significantly more content to offer with its Prime Video streaming service.
Don't expect Amazon to remain on the sidelines with potential business development deals as it absorbs MGM, though. The company's history shows that it could continue gobbling up other businesses. And there's one that just might be an especially intriguing target. Could Amazon acquire Teladoc Health(TDOC-3.29%)next?
Obvious benefits for Teladoc
It's easy to see how Teladoc would benefit from a buyout by Amazon. Thehealthcare stockhas plunged more than 75% from its high in early 2021. If Amazon made an offer to acquire Teladoc, the price tag would almost certainly reflect a hefty premium to the virtual care company's current share price.
Teladoc investorswere excited in Februaryby news of a collaboration with Amazon. The two companies teamed up to connect Teladoc's telehealth services with Amazon's Alexa virtual assistant. Anyone who owns an Echo device will be able to simply say, "Alexa, I want to talk to a doctor" to be immediately connected with Teladoc's call center. The capability will only be available via audio at first but will soon support video visits as well.
When this partnership was announced, Teladoc chief product officer Donna Boyer said that the collaboration "is yet another step in breaking down barriers to healthcare access." If Teladoc was actually part of Amazon, those barriers could be broken down even further.
Why it makes sense for Amazon
But would acquiring Teladoc Health make sense for Amazon? There's a solid case to be made that it would.
Amazon has steadily been expanding increasingly into healthcare. The company operates an online pharmacy. Last summer, Amazon launched its own telehealth product called Amazon Care. This move was a logical next step for Amazon, considering that the U.S. virtual care market opportunity could top $260 billion.
Amazon Care competes with Teladoc in several ways. However, it doesn't offer the scope of services that Teladoc does. Amazon Care also isn't available 24 hours per day as Teladoc's services are. An acquisition of Teladoc would up Amazon's game considerably.
Perhaps most importantly, Teladoc's client base already includes more than half of the Fortune 500. Amazon Care doesn't appear to have made significant inroads with larger customers yet.
For example, in February Amazon highlighted three new customers --Silicon Labs,TrueBlue, and Whole Foods Market. Neither Silicon Labs nor TrueBlue are big enough to be in the Fortune 500. And Whole Foods is owned by Amazon itself.
Amazon can also easily afford to buy Teladoc. The company's cash stockpile topped $36.4 billion at the end of 2021. Teladoc's market cap currently stands at close to $10.5 billion. Even with paying a premium, Amazon wouldn't break a sweat with the acquisition.
Don't bet on it
Buying shares of any company on speculation that it might be acquired is usually not a great idea. That's true in this case. So far, Amazon hasn't given any indication that it's looking to acquire Teladoc.
It's quite possible that Amazon will choose to continue building out Amazon Care organically. Or if Amazon does make acquisitions, it could target smaller telehealth businesses.
Amazon seems likely to continue delivering strong growth. Its expansion into healthcare, including telehealth, should pay off over time. Meanwhile, Teladoc is especially attractively valued right now in the context of its huge growth opportunity.
Don't bet on Amazon buying Teladoc. However, betting on Amazon and Teladoc, individually, could be a smart choice for long-term investors.
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