Amazon.com raided the pharmacy on Tuesday, battering 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 pharmacist-staffed help line, and discount cards for uninsured consumers. CVS stock promptly sank 9%, to $67; Walgreens 9%, to $40; and smaller Rite Aid 16%, to $10.88. Even shares of drug distributors AmerisourceBergen, McKesson, and Cardinal Health got hit.
Investors are overreacting. Two years ago, Amazon bought PillPack, which packages and mails prescriptions. Free shipping and discount cards add nothing that isn’t available from 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 Bank of America Securities’ Michael Cherny notes that mail order represents less than 20% of prescription-drug sales.
CVS and Walgreens are already growing high-touch services, making stores into health-care outposts staffed by medical professionals. After buying Aetna, CVS is integrating services from insurance to retail. Walgreens is moving more slowly, partnering with VillageMD medical clinics. Cherney has a Buy on CVS, an Underperform on Walgreens.
The biggest impact may be on drug-discount card company GoodRx. Its stock soared 50% on its September debut, and Sheridan began coverage with a Buy rating. On Tuesday, he admitted Amazon had become a threat with its offer of Cigna’s InsideRx to Prime members. GoodRx shares dived 20% on Tuesday, to $37.50, not far from the company’s $33 IPO price.
Next Week
Monday 11/23
Agilent Technologies reports fourth-quarter fiscal-2020 earnings.
IHS Markit releases its Manufacturing and Services Purchasing Managers’ Indices for November. Consensus estimates are for a 53 Manufacturing PMI and 56.5 for the Services PMI. Both estimates are slightly lower than the October data.
The Federal Reserve Bank of Chicago releases its National Activity Index for October. Economists forecast a 0.23 reading, roughly even with the September figure. Since peaking at an all-time high of 5.93 in June, the index has steadily fallen, suggesting that the economy will continue to grow but at a slower pace.
Tuesday 11/24
Analog Devices, Autodesk, Best Buy, Burlington Stores, Dell Technologies, Dollar Tree, Gap, Hormel Foods, HP Inc., J.M. Smucker, Jacobs Engineering Group, Medtronic, and VMware report quarterly results.
The Federal Housing Finance Agency releases its House Price Index for September and the third quarter. In August, home prices rose 8% year over year, according to the FHFA. The strongest gains were out West in states like Arizona and Idaho.
The Conference Board releases its Consumer Confidence Index for November. Expectations are for a 98 reading, down from 100.9 in October.
Wednesday 11/25
The Bureau of Economic Analysis reports its second estimate for third-quarter GDP. Economists forecast a 33.1% seasonally adjusted annual growth rate, a record high.
Deere hosts a conference call to discuss earnings.
The Federal Open Market Committee releases minutes for its early-November monetary-policy meeting.
The Census Bureau reports new single-family home sales for October. Economists forecast a seasonally adjusted annual rate of 972,500 homes sold, up from 959,000 in September. New-home sales continue to hover near their post-financial-crisis peak.
The Bureau of Economic Analysis reports personal income and spending for October. Expectations are for a 0.4% month-over-month gain in income; spending is seen rising 0.8%. This compares with increases of 0.9% and 1.4%, respectively, in September.
The Census Bureau releases the Durable Goods report for October. Consensus estimate is for a 1.5% month-over-month jump to $240.7 billion in new orders for manufactured goods.
Thursday 11/26
U.S. equity and fixed-income markets are closed for Thanksgiving Day.
Friday 11/27
The Nasdaq and 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]
