Amazon has done it again. The tech giant is disrupting another industry, and investors are cashing out of healthcare as Jeff Bezos moves in.
But that could be a huge mistake…
In fact, we've found the one pharmacy stock that can weather the storm from Amazon's entrance into the prescription industry. And that means huge profits for you as less-informed investors flee the market.
On June 28, Amazon.com Inc. (NASDAQ: AMZN) announced the acquisition of PillPack Inc., an online pharmacy company that ships prescriptions directly to customers.
Wall Street took the news as another nail in the coffin for brick-and-mortar pharmacies, cutting $12.8 billion in market value from the pharmaceutical retail sector in a matter of hours.
But the pharmacy stock we're eyeballing is doubling down on brick-and-mortar stores and developing an innovative strategy to avoid Amazon's industry disruptions altogether…
Amazon Healthcare Is Here to Stay, but It Can't Beat One Company
According to PillPack's website, the company is licensed to ship prescriptions in 49 states and generated a profit of over $100 million in 2017.
Jeff Wilke, CEO of Amazon Worldwide Consumer, recently said that this established infrastructure and demonstrated profitability made the company a slam-dunk acquisition for Amazon.
“PillPack's visionary team has a combination of deep pharmacy experience and a focus on technology,” he said in a recent statement.
“PillPack is meaningfully improving its customers' lives, and we want to help them continue making it easy for people to save time, simplify their lives, and feel healthier. We're excited to see what we can do together on behalf of customers over time.”
While this is great news for customers, it's proven to be an ominous development for pharmacy retailers.
Amazon's acquisition of PillPack is the retail juggernaut's latest attack on an industry long protected from online sales due to regulatory statutes.
In October 2017, the St. Louis Post-Dispatch reported that Amazon had recently received approval for wholesale pharmacy licenses in at least 12 states.
With the PillPack acquisition, Amazon's foray into the pharmaceutical distribution industry has contributed to a 10% drop in the three largest pharmacy stocks over the last 12 months.
And Amazon's creep into healthcare is unlikely to stop any time soon.
CNBC estimates that patients and insurance companies spent $300 billion on prescription drugs in 2015. With more than 4 billion prescriptions ordered in the United States every year, Amazon has plenty of opportunity to capitalize on demand.
RBC Capital Markets analyst George Hill believes that “Amazon's official entry into this space will now place a cap on drug supply chain multiples regardless of whether or not Amazon is able to scale the PillPack business.”
In other words, no matter how successful Amazon is with expanding PillPack, its entrance into the pharmacy business is a revolutionary development that's bound to disrupt the industry.
For traditional brick-and-mortar pharmacies to survive, they must evolve to meet changing customer habits and demands in ways Amazon can't.
And we've identified one that's doing just that.
It's a nationally recognized pharmaceutical retailer that's adopted a radical strategy to adjust to a changing market landscape – and is set to make a killing in the process.
It has a Money Morning Stock VQScore™ of 4, indicating it's a perfect time to add this company to your portfolio before it breaks out.
In fact, analysts see its stock gaining over 56% in the near future…
CVS Health Corp. Is Our Top Pharmacy Stock
Headquartered in Woonsocket, Rhode Island, CVS Health Corp. (NYSE: CVS) is one of the nation's most popular suppliers of prescriptions and health and beauty aid products.
CVS has been a trendsetting pharmaceutical retailer for the last decade as the company has strived to diversify in an effort to survive radically evolving consumer shopping habits.
In 2014, CVS changed its name to CVS Health and removed tobacco products from pharmacy store shelves. It was an early effort to rebrand as a more holistic health services company that provided more than just prescriptions.
Over the last four years, CVS has continued to diversify its retail health offerings, developing an initiative to transform its traditional pharmacy locations into streamlined medical clinics.
In December 2017, CVS acquired Aetna Inc. (NYSE: AET) for $69 billion in an effort to boost the company's ability to provide customers with everything from treating minor illnesses to monitoring chronic conditions.
Aetna, an insurance company that provides direct healthcare services, is expected to accelerate CVS' transition into a diversified medical services company.
CVS clinics will make it easy for people with chronic illnesses or time-sensitive health issues to get treatment without breaking the bank.
And because CVS will continue to offer services in physical locations, CVS will be able to offer a level of attention and care that Amazon's business model is simply not capable of providing.
According to CVS Health Chief Operating Officer Jon Roberts, this investment will keep CVS competitive by transforming the company into a “performance-based network.”
“Steadily increasing drug costs, and the current transition in healthcare from volume to value, require us to continually develop and implement innovative solutions to help our clients manage pharmacy costs while improving health outcomes,” he said earlier this year.
CVS is down roughly 8% following Amazon's acquisition of PillPack. However, CVS' strong redevelopment makes it clear that Wall Street has overreacted and put this pharmacy stock on sale.
As a result, smart investors can pick up CVS stock for $64.50 before it hits analysts' price target of $100 – a gain of 56%.