CVS Has a Big Problem As Amazon Launches Its Pharmacy Business
Sunday, November 22, 2020
Amazon Pharmacy launched on Tuesday. The initial launch sent CVS and Walgreens' stocks tumbling.
CVS’ stock lost 9.7% of its value this week.
Walgreens' stock fell even more -- losing 14.3%.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTFor CVS, the Woonsocket-based super healthcare retailer, the coronavirus pandemic has allowed the company to transform.
Now Amazon Pharmacy is offering to customers the option to use a pharmacy profile on the company’s site to add insurance information, manage prescriptions and pay for medication online -- just another way for Amazon to build a deeper relationship with customers just as their Whole Foods acquisition allowed them to embed into the lives of millions of affluent grocery buyers.
Reaction By Wall Street
MarketWatch reports that that Bank of America analysts believe that CVS can compete with Amazon.
“Ultimately we have said time and time again that companies across the channel need to adapt to a changing landscape, and we see CVS as being better positioned along those lines given the Aetna merger and both the broader enterprise offering and revenue diversification that an integrated medical/pharmacy services/retail offering provides,” analysts wrote in a Tuesday note.
Bank of America rates CVS shares a buy with an $83 target price.
In the past couple of years, CVS has acquired insurance giant Aetna, has been able to transform its online and delivery business in response to the virus, and recently announced a new CEO Karen Lynch who will take over in February.
But, Wall Street has not been responsive. Since the first of the year, CVS’ stock has fallen 10.4%.
In contrast, Amazon has been like Pac-Man gobbling up business and the stock has responded.
Amazon’s stock has increased 63% year to date.
Barron’s writes that the Amazon challenge is nothing new and may be over-hyped.
“Investors are overreacting. Amazon entered the pharmacy business two years ago, with its purchase of PillPack. Tuesday’s announcement of free shipping and discount cards adds nothing that is not available from CVS and Walgreens. UBS analyst Eric Sheridan sees Amazon’s move as a way to add value to its Prime membership program and capture more of its members’ spending,” reports Barron’s.
CVS financial performance has been solid. CVS Health President and CEO Larry Merlo in announcing the company's third-quarter earnings last month said, "Our strong third-quarter results demonstrate continued execution of our long-term strategic plan that is transforming the way health care is delivered. As an integrated health services provider, we're developing holistic and innovative solutions that meet the needs of our customers in the community, in the home or in the palm of their hand."
"Our comprehensive pandemic response shows the power of a diverse and agile enterprise," he continued. "We've opened more than 4,000 COVID-19 test sites across the country since March, and have administered over six million tests. We're helping businesses and universities safely reopen and we were recently selected to administer COVID-19 vaccinations in long-term care facilities. We'll continue to play a vital role in our nation's recovery thanks to the tireless efforts of our nearly 300,000 employees."
For the third-quarter CVS' total revenues increased to $67.1 billion, up 3.5% compared to prior year.
Rhode Island Impact
For Rhode Island the stakes are high, as CVS is the state’s largest private employer.
The good news is that a CVS that is more tech-focused may be a driving force to creating more tech jobs in Rhode Island. CVS won't need more retail stores in Utah, it will need more tech strategists here to transform and compete with one of the globe's most dominant tech companies.
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- CVS Has a Big Problem As Amazon Launches Its Pharmacy Business
