- The market is irrationally selling Walgreens off on the news of Amazon's entry as an online pharmacy.
- Walgreens is selling off more than CVS, which doesn't make sense given their lack of mail-order pharmacy exposure.
- A similar trade made on Target in 2017 on the Amazon-Wholefoods tie-up has yielded >250% total returns.
- While this isn't nearly as appetizing a trade as Target in 2017, Walgreens has substantial free cash generation capabilities and should return to earnings growth in 2021.
- Pharmacy customers are quite loyal to their pharmacy, and I don't expect margin pressure for Walgreens from this Amazon entry.
For further details see:
Walgreens: Amazon Driven Panic Makes This The Next 'Target'