Big tech struggles to break into the massive healthcare industry, Amazon pushes harder
There’s a better way, and Amazon wants to be the one to provide it. Nearly two weeks after stirring up the food delivery space, Amazon is spreading fear to another industry — paying up big time to acquire a health care company.
What happens when you don’t succeed?
Throw more money at the problem. Amazon’s first attempt at healthcare — a joint venture with JPMorgan and Berkshire Hathaway — was shut down after three years. Failures aside, Amazon continued its healthcare expansion.
- In 2018, Amazon acquired online pharmacy PillPack for $1B.
- Earlier this year, Amazon expanded its Amazon Care service nationwide.
Now it’s acquiring One Medical (NASDAQ:ONEM) — a network of in-person and virtual primary care providers — for $3.9B.
But Amazon’s healthcare business is still minuscule compared to the rest of its business — unlikely to have a major impact on earnings or its stock price in the short term.
Americans spent $4.1T on healthcare in 2020
Startups tackled the problem with tech — offering virtual healthcare services, which became popular during COVID.
- Cash-burning startups capitalized by going public — just to see their stock prices crash as markets reversed.
- One Medical was part of that group. After going public in 2020, $ONEM cratered nearly 90% before the acquisition.
Pharmacy operators saw it as an opportunity to expand both physically and virtually as in-person physician visits rebounded. Walmart, Walgreens and CVS are all making major health care expansions — opening more clinics and launching virtual offerings.
Investors: Upcoming earnings in question
Amazon reports earnings next week, but the outlook is anything but clear.
- Slowing e-commerce: Data from Amazon Prime Day showed record sales — but per Mastercard’s June data, e-commerce sales rose only 1.1%,, while in-store grew 11.7% compared to the previous year.
- Cost uncertainty: Amazon’s retail business has been hammered by high labor, fuel and freight costs — and the Justice Department is investigating its warehouses for worker safety.
Inflation, post-COVID shopping habits and recession fears created the (im)perfect storm on e-commerce. The forecast is cloudy, and investors are flying into earnings blind.