Manhattan Venture Partners Head of Research Santosh Rao joins Yahoo Finance Live to discuss Amazon and its latest move to buy Signify Health, and what it means for the company's health care agenda going forward.

Video Transcript

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DAVID BRIGGS: Amazon continuing its push into the health care industry. The e-commerce giant reportedly among the bidders for home health service provider Signify Health. But what does it mean for Amazon moving forward? Santosh Rao joining us now with more on this. Good to see you, sir. So in terms of the--

SANTOSH RAO: Thank you.

DAVID BRIGGS: --investor story, what does the Amazon push into health care mean?

SANTOSH RAO: Yeah. Thanks for having me. Well, this is another push into health care. They're just rounding out the whole push into health care, like I said. They have the online prescription, virtual physical, and they have a pharmacy as well right from the beginning. So I think this is another one where they get the analytics behind it. They get home-- home care, kind of a better foothold into providing care.

So essentially, they are rounding it out, and they will do more. But this is another step in getting more data and providing better service in terms of health care and virtual and physical care. So it perfectly makes sense. It's totally aligned with what they want to do in health care, which is go deep in one of the fastest-growing sectors of the whole economy. In the face of their core business kind of stalling, I would say, physical stores hasn't taken off and other business, other than AWS and advertising, they're still kind of not doing that great, so I think this makes perfect sense to kind of get deeper into it.

SEANA SMITH: Santosh, what about the regulatory angle? Just how much antitrust scrutiny do you expect Amazon to face if they, in fact, do go through with this and buy Signify?

SANTOSH RAO: Yeah, I'm sure it'll be looked at very closely. I mean, anything the big techs do is looked at because they're pretty big now. So I think it'll be carefully looked at. But as long as there's no overlap, as long-- as long as they're not cornering any market share-- I think this is a very big industry, very fragmented at this point, I think-- I don't see any regulatory hurdle at this point, but you never know.

They'll always be something. But they will definitely get a very close look just because they are Amazon. But I don't see why this should stop the regulators from-- stop the company from going ahead with this.

RACHELLE AKUFFO: I mean, this would be quite the buying spree if we include, obviously, One Medical, saying it wants to also buy One Medical for about $4 billion there. When you expect those sorts of investments to start paying off?

SANTOSH RAO: Yes, that's a very good question because not everything that Amazon does works. Whole Foods has been OK. I mean, the physical store part, that business is really not that great. Of course, they have a physical location, which they also want to do, compete with the Walmarts and other ones, brick and mortar ones. So it has its own stake.

But they will continue to buy. I mean, they will make it work. And they have the resources. They have about close-- over $30 billion in cash. Last year, they were not free cash flow positive. But again, they will be pretty soon because last year, they invested in warehouses and all the other stuff because of the pandemic.

But again, they will be-- so they have the financial wherewithal to go out and make these acquisitions and make-- well, and they have to because not every business will do well. And they are known to reinvent and go deeper and deeper into logistics and every other business that they can find and which are natural extensions of what they do with their broad presence and their ability to execute so well. So you will see many more of such kind. And health care is so-- so big and so-- so many aspects to it, but there's a lot more to go into it.

DAVID BRIGGS: And just today, Amazon Web Services out with a new PSA featuring two celebrities, very high-profile celebrities, Michael B. Jordan and actress Tessa Thompson. I think we have a clip, and I'll ask you about it on the flip side. Guys, do we have that?

OK, apparently we don't have the audio, but you can see Tessa Thompson and Michael B. Jordan there. This is about cybersecurity, Amazon Web Services. How significant is Amazon Web Services in terms of the investor story moving forward?

SANTOSH RAO: Absolutely. I mean, that's their crown jewel. I mean, that's what keeps the lights on for them. It's the most profitable business, high-margin business, and so they cannot let go. They will-- and cybersecurity, on the other hand, is, again, a very important aspect. And you see all these CrowdStrike and all the other companies, despite all the headwinds, still doing very well because cybersecurity is going to be huge going forward, for obvious reasons.

There's so much going on, so many breaches, and so cybersecurity is big. And for them to do this and advertise it and make sure-- and tell the people that, hey, we are deep into it. This is the place to be, very secure place to be. So I think perfect-- perfectly makes sense. I think they're doing the right thing.

SEANA SMITH: So Santosh, we know AWS critical here to Amazon's business looking to explore-- or expand, I should say, in other industries, specifically health care with the news today, yet the stock's still down about 20% so far this year. What's the next catalyst, do you think, for Amazon stock?

SANTOSH RAO: Well, I think-- I mean, everything's down. I mean, the tech is down, growth is down. We have this whole phenomena of interest rates and growth. So all that is playing into this. Their core business, they're still the incumbent leader in e-commerce, still a long way to go. E-commerce is still a very small part of the overall retail business, so there's a big runway ahead there.

So at this point, I think they don't need to stop-- you'll see the slowdown, some bumps here and there, plus they split quite a bit, so I think they came down. But there are a lot of-- all the technical factors going into that. But the core business, the fundamentals of the business, are still very good. And if they continue to do this health care and cybersecurity and all those things, checking the right boxes to keep them in the news and keep them on the right side of the market, you won't see them do badly.

So I expect them to go on doing-- maybe down the road, they'll have medical insurance out there. There's so many things once you have that base, that entrenched base, and you can provide so many services and cross-sell across different areas with all the information that you're going to get with this analytics acquisition that they're doing, so I think all this will add up. So I think it's perfect sense.

I like it. I like the acquisition, if it goes through. I mean, they're just bidding on it. I think it's going to be finalized pretty soon. It's going to be 2 times enterprise value if-- they say $8 billion is the right price that it will go at in the end, the auction price. We'll see if they win because the competition is pretty big there.

RACHELLE AKUFFO: And as you mentioned, obviously old companies really under these macroeconomic pressures. Is there anything specifically that you see being a big headwind for Amazon outside of the general macroeconomic pressures?

SANTOSH RAO: I don't see-- I mean, of course, the recession and everything is always bad. And e-commerce lends itself to being cheaper and all that plays into recession. They should benefit from that in the end. So I don't see-- I think the biggest thing is regulatory issues and any hiccups in execution.

The new CEO, he's being very prudent. He's cut costs, is kind of rationalized the whole thing, rationalizing the business. So I think he's on the right track. So let's see how they do overall, but it's going to get that head-- the draft, the downdraft that's coming here to tech-- that tech is facing right now.

So they're going to feel it as well being one of the biggest out there. So there's no worry about that. I would say it's a great-- excellent buying opportunity to kind of get in there and wait it out because in the end, these are the last guys standing. And all these big tech, they'll continue to do well.

RACHELLE AKUFFO: Well, always great having you on. Santosh Rao, have a great afternoon. Thank you.