Walgreens versus CVS: Comparing Pharmacy Giants

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Part 7
Walgreens versus CVS: Comparing Pharmacy Giants PART 7 OF 9

WBA, CVS Fall on News of Amazon Entering Prescription Drug Market

The Amazon effect on drugstore stocks

Most of the pharmaceutical stocks took a hit recently as news of Amazon’s (AMZN) potential entry into the pharma space spread. Walgreens Boots Alliance (WBA) and CVS Health (CVS) were among the biggest losers, each falling ~4.9% after CNBC reported on October 6 that Amazon could clarify its strategy of entering the prescription drug market by this Thanksgiving.

WBA, CVS Fall on News of Amazon Entering Prescription Drug Market

Amazon’s move could prove to be a threat for CVS and Walgreens Boots, noted Ana Gupte of Leerink Partners: “AMZN is a meaningful competitive threat to existing players in the drug value chain with its best-in-class mail order fulfillment platform and easy-to-use one stop shopping Retail Pharmacy experience.”

CVS hits 11-month low while Walgreens hits three-year low

On October 11, 2017, Walgreens and CVS lost 10.4% and 8.7%, respectively, since the news was released on October 6. On that date, Walgreens traded at $68.92, hitting its three-year low price. The company’s stock is down 16.7% year-to-date.

On October 11, CVS Health touched its 11-month low and traded at $73.90. The company has lost 6.3% year-to-date.

Competitor Rite Aid (RAD), which recently sold 1,932 pharmacies to Walgreens, has lost 78% of its value year-to-date.

All three drugstore companies have underperformed the S&P 500 Food and Staples Retail Index (-0.3%) and the S&P 500 Index (SPX) (14.1%) year-to-date.

Investors looking for exposure to Walgreens, Rite Aid, and CVS can consider the First Trust Consumer Staples AlphaDEX ETF (FXG), which invests ~7.2% of its portfolio in the three companies.

Read the next article for a comparative picture of WBA’s and CVS’s valuations, earnings, and dividends.


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