Shares of Teladoc (TDOC) are trading lower on Wednesday following a news report saying that Amazon (AMZN) is building a telehealth business and pitching the service to major employers including Zillow (ZG). Commenting on the news, Baird analyst Matthew Gillmor said that while Amazon Care "could emerge as a viable threat" to Teladoc over time, "recent progress is perhaps less than meets the eye" and he would be a buyer of Teledoc amid today's weakness.

AMAZON BUILDING TELEHEALTH BUSINESS: Amazon is building a telehealth business and pitching the service to major employers including Zillow, Business Insider's Blake Dodge reported, citing five people familiar with the matter. In November, the e-commerce giant announced Amazon Pharmacy, a drug-delivering business in 48 states with steep discounts for Prime members, the publication noted.

"We do not comment on rumor or speculation," an Amazon spokesperson said in an emailed response to Business Insider's request for comment and interviews. "Amazon Care is a healthcare benefit pilot for Amazon employees in the state of Washington." Amazon Care started as a pilot in 2019 for just Amazon employees in Seattle, providing them with medical care at home or in person. Now, the e-commerce giant wants to sell that service to other large companies, the author said. For employers who sign on for the service, which is run in partnership with the medical group Care Medical, employees near their headquarters will get online and in-person doctor visits, Business Insider has found. Employees elsewhere will get just the virtual components.

BUYER AMID WEAKNESS: After the Business Insider report discussing recent developments with Amazon Care, Amazon's on-site primary care pilot with virtual health capabilities, prompted a pullback on Wednesday in Teladoc shares, Baird analyst Matthew Gillmor noted that the article suggested Amazon Care was making progress selling the solution to major companies but also pointed to Amazon Care faltering in key areas.

While Gillmor acknowledged Amazon Care "could emerge as a viable threat" to Teladoc, and 1Life Healthcare (ONEM), over time, he argued that "recent progress is perhaps less than meets the eye." The analyst, who would be a buyer on Wednesday's weakness, expects investor conferences in January could serve as a positive catalyst for Teladoc. He keeps an Outperform rating on Teladoc shares.

PRICE ACTION: In afternoon trading, shares of Teladoc have dropped over 4% to $187.90. Amwell (AMWL), another competitor in the telehealth market, is down about 8% to $27.71 per share.