-Written by Sijia-
Amazon($AMZN) shares rally a day after the released its second quarter earnings. In an otherwise gloomy quarter for tech giants like Amazon, it brought bright results. Sales for last three months ended in June grew 7% to $121.23 billion, which was higher than Wall Street’s expected $119.09 billion. Besides this recent revenue growth, here are my reasons that Amazon($AMZN) is still a good bet in the long run. Amazon has greatly diversified operations. Besides its two best known business, AWS and e-commerce business, Amazon goes far beyond retail and cloud. Prime video, big competitor of Netflix and other streaming platform. Wholefoods, grocery chain giant. We see that Amazon has a proper place in various major industries, but what I want to talk about today is the actions Amazon took to push into the healthcare space and its potential in owning the entire healthcare value chain.
A few weeks ago, Amazon agreed to buy One Medical for $3.9 billion, an owner of membership-based healthcare clinics. Though not like AWS cloud service, medical is a low margin and we cannot expect its contribution in near term, the merge could largely facilitate the e-commerce giant entering virtual healthcare field. And apparently the acquisition is not the first evidence showing Amazon’s ambition in expanding its reach in the healthcare industry. Back in 2018, Amazon acquired digital pharmacy PillPack for $750m; PillPack produces user-friendly packaging to support those with chronic conditions who need to take multiple medications daily. They also started a primary-care network, Amazon Care, for its employees. Before the acquisition, the service is a direct competitor of One Medical.
Speaking of Amazon’s core competitiveness, Amazon Web Services accounts for more than half of its revenue. This is mainly due to the accelerated pace of digital transformation in various industries and the increase in demand for cloud services. According to the company’s quarter 2 financial report, second quarter AWS revenue shot up 37% year over year to $18.4 billion. But will Amazon’s AWS cloud service be able to hold the leadership spot in the industry when other tech giants, including Google and Microsoft have also made forays into cloud service in recent years. These competitors will definitely get a slice of the cake. To be honest, the company has struggled to expand further in its core market, forcing it to aggressively push into areas where it has less impact, such as healthcare or autonomous driving, to remain competitive. MGM’s and Whole Foods deals are now also connected to the company’s Prime subscription offering, allowing it to generate more consistent revenue from millions of consumers and boost customer loyalty. One Medical definitely can follow the same pattern though Amazon has not announced it will do so.
Pharmacy is the front-door of healthcare industry, and I believe Amazon will continue penetrating the whole healthcare industry. With Amazon Prime, customers are allowed to order and receive products they want in two days. Amazon already owns customer preference data, their click, browsing time, clicks and buy choice. What if it can combine personal health data with these shopping patterns data to identify whether an individual will probably be sick and Alexa, Amazon’s virtual personal assistant could warn the user. And if users need to see a doctor, they can make an appointment online with the help of virtual assistant. The doctor could order a prescription virtually using text or voice message during the appointment, and the medication could be delivered to the patient’s home in less than two days just like prime package. If this scenario can become reality, there is no doubt Amazon can change can give customers completely different healthcare experience.
Conclusion: With a competitive e-commerce operation and the large amount of revenue cloud business could generate, not to mention Amazon’s diversified operations, the company still has plenty of long-term potential. Amazon likes to play long game, and entering the pharmacy industry is just its start to penetrate the healthcare industry.