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Illustration by Elias Stein
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Amazon.com
raided the drugstore on Tuesday, beating shares of
CVS Health
and
Walgreens Boots Alliance.
The online colossus said its Amazon pharmacy will offer free two-day delivery of prescriptions to Amazon Prime members, a helpline comprised of pharmacists, and discount cards for uninsured consumers. CVS quickly fell 9% to $ 67; Walgreens 9%, at $ 40; and smaller
Rite aid
16% to $ 10.88. Even the shares of drug distributors
AmerisourceBergen,
Mckesson,
and
Cardinal health
was hit.
Investors are overreacting. Two years ago, Amazon bought PillPack, which packages and sends prescriptions by email. Free shipping and discount cards add nothing that isn’t available at CVS and Walgreens.
UBS
Eric Sheridan sees Amazon’s move as a way to add value to its Prime membership and capture more of its members’ spending. And Michael Cherny of Bank of America Securities notes that mail-order sales represent less than 20% of prescription drug sales.
CVS and Walgreens are already developing premium services, transforming stores into healthcare outposts staffed with healthcare professionals. After purchasing Aetna, CVS integrates services ranging from insurance to retail. Walgreens is moving more slowly, in partnership with VillageMD medical clinics. Cherney has a buy on CVS, an underperformance on Walgreens.
Biggest impact could be on drug discount card companies
GoodRx.
Its stock jumped 50% when it debuted in September, and Sheridan started coverage with a buy note. On Tuesday, he admitted that Amazon had become a threat with its offer to
Cignaof
InsideRx to Prime members. GoodRx shares plunged 20% on Tuesday, to $ 37.50, not far from the company’s $ 33 IPO price.
Next week
Monday 23/11
Agilent Technologies
publishes its results for the fourth quarter of fiscal 2020.
IHS Markit
releases its manufacturing and service purchasing managers index for November. The consensus estimates are for a manufacturing PMI of 53 and 56.5 for the services PMI. Both estimates are slightly lower than the October data.
The Federal Reserve The Bank of Chicago releases its National Activity Index for October. Economists are forecasting a reading of 0.23, roughly equal to September’s figure. Since peaking at an all-time high of 5.93 in June, the index has fallen steadily, suggesting that the economy will continue to grow, but at a slower pace.
Tuesday 24/11
Analog devices,
Autodesk,
Best buy,
Burlington Shops,
Dell Technologies,
Dollar tree,
Difference,
Hormel Foods,
HP Inc.,
Jm smucker,
Jacobs Engineering Group,
Medtronic and
VMware
publish quarterly results.
Federal housing The Financial Agency publishes its house price index for September and the third quarter. In August, house prices rose 8% year-over-year, according to the FHFA. The biggest gains were made in the West in states like Arizona and Idaho.
The Conference Board publishes its consumer confidence index for November. Expectations are for a reading of 98, down from 100.9 in October.
Wednesday 25/11
The Economic Analysis Office presents its second estimate of third quarter GDP. Economists predict a seasonally adjusted annual growth rate of 33.1%, a record.
Deere
hosts a conference call to discuss the results.
The Federal Free Market The Committee publishes the minutes of its monetary policy meeting in early November.
The Census Bureau announces new single-family home sales for October. Economists predict a seasonally adjusted annual rate of 972,500 homes sold, up from 959,000 in September. New home sales continue to be near their post-financial crisis peak.
The Bureau of Economic The analysis reports personal income and expenses for October. We expect income to gain 0.4% month over month; expenditure increases by 0.8%. This compares to increases of 0.9% and 1.4%, respectively, in September.
The Census Bureau publishes durable goods report for October. The consensus estimate is for a 1.5% month-over-month jump to $ 240.7 billion in new manufactured orders.
Thursday 26/11
American equities and fixed income markets are closed for Thanksgiving Day.
Friday 11/27
The Nasdaq and the New York Stock Exchange close early at 1 p.m. EST, while the bond market closes at 2 p.m.
It’s Black Friday, the unofficial start of the holiday shopping season.
Write to Bill Alpert at [email protected]
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