Has Amazon's Path Into Healthcare Just Gotten Clearer?

Though details are sparse, we view the Jan. 30 announcement that wide-moat

Instead of directly entering the market through an acquisition of or partnership with a pharmacy benefit manager, insurer, drugstore, or distributor--moves that are still on the table but would require federal and state licensing and other regulatory approvals--this development strikes us as closer to Amazon's typical playbook when entering a new category: acquiring as much data as possible before moving forward with the optimal path to disruption.

The announcement itself won't immediately affect our $1,250 fair value estimate (which we plan to reassess after the company's fourth-quarter update Feb. 1) or our moat rating for Amazon, but there are layers of potential upside to our longer-term assumptions.

With a pool of 1.2 million direct employees from the partnership firms potentially covered by the new company (541,900 at Amazon, 367,700 at Berkshire Hathaway, and 243,400 at JPMorgan Chase) and opportunities to initially expand through Amazon's third-party seller network and Berkshire and JPMorgan subsidiaries, Amazon would have access to new sources of consumer data with which to refine its healthcare platform while significantly improving its bargaining position with healthcare vendors.

From there, we believe the new healthcare partnership company could develop into a solution for other corporations or customers of each company, though financial contribution from this partnership is likely years away at the earliest.

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