A Drugstore Immune to Amazon?

Published on
July 10th, 2018
Topic
US Economy, Trading, Micro
Duration
10 minutes
Asset class
Equities

A Drugstore Immune to Amazon?

Trade Ideas ·
Featuring Chad Morganlander

Published on: July 10th, 2018 • Duration: 10 minutes • Asset Class: Equities • Topic: US Economy, Trading, Micro

Chad Morganlander of Washington Crossing Advisors believes that Walgreens Boots Alliance is well-positioned to take on Amazon’s foray into drug retail industry. Chad lays out his trade in this interview with Brian Price. Filmed on July 2, 2018.

Comments

  • JD
    Joe D.
    18 July 2018 @ 22:21
    If people are going to change behavior, and go from local pharmacy to online sales, it's likely greased with promise of better prices (maybe promotions, or bundling with care services?). If AMZN doesn't offer a better perceived pricing, then CVS AND WALGREENS will be able to hold on much longer. It would be interesting to see net contribution from non-pharmacy at all the brick and mortar stores, and what the operating margin would be there.
  • KB
    Keith B.
    11 July 2018 @ 23:33
    Sometimes a reality check is what the doc ordered. WBA has ~$130bn of sales, CVS has ~$185bn of sales, WMT and other groceries have ~$$$bn of pharmacy sales and independents have another ~$$$bn. Frankly, it’s beyond me how anyone can seriously think that AMZN with no pharmacy sales (ex. certain medical devices), before acquisition of a mail order pharmacy with ~$100m of sales, can do meaningful damage anytime soon, at least within most people’s investment horizons, let alone trading horizons. WBA and other pharmacies may have 99 problems, but the AMZN ain’t one.
  • NI
    Nate I.
    11 July 2018 @ 04:12
    Note to C M. There is nothing (except regulation - for the time being anyway) stopping Amazon from making a pharmacist available via video or phone chat. Costs will win out, as they always do, and force government to relax regulations that impair telemedicine.
    • SS
      Steve S.
      11 July 2018 @ 05:27
      @Nate. You should look into a company called Ping An Good Doctor in China which does exactly this. Listed in Hong Kong.
  • FH
    Frank H.
    11 July 2018 @ 01:39
    I would be nice to know why he doesn’t own it personally. Is it bc firm or SEC rules or just not true believer.
  • SS
    Sam S.
    10 July 2018 @ 19:25
    Way too much "maybe, what if, hopefully, etc." Any company can get better "if" things happen. Not going to bet on this thesis. Drug Mfg's I'm sure will be doing huge volume deals with Amazon. Scripts are down because it's all TOO expensive and so many drugs are being withdrawn or limited for doctors to prescribe. Chad is an excellent speaker, but I don't agree with hope as being the best strategy. I'll find something else to get hooked on.
  • MC
    Minum C.
    10 July 2018 @ 16:00
    I like this guy's methodology and approach. Hard to be a value investor today with all the mania stocks taking over, but this guy looks like he's been around long enough to come out of the other side smelling like roses. WBA will probably work out well for him over his stated time horizon.
  • SS
    Steve S.
    10 July 2018 @ 10:56
    I totally disagree with Chad's last 2 trade idea recommendations including this one (previous one on Starbucks). Amazon will crush Walgreens. Amazon can utilise its expertise to provide similar in-store services Walgreens can in its Whole Foods stores. They will also put downward pressure on Walgreen's margins.
    • CT
      Christopher T.
      10 July 2018 @ 11:58
      This is consensus view and thus priced in... Markets paranoia with Amazon is to be taken advantage of. Don't even need to dive too deep, look at XRT ytd
    • YB
      Yuriy B.
      10 July 2018 @ 12:27
      Kulbir, I generally agree with you. Chad's bull thesis relies on Walgreens executing a successful transition at each of their stores from pharmacy -> full-service clinic. This might happen but certainly won't happen overnight. For the sake of consumer experience, I'd love to see Amazon open a series of their own "minute clinics" adjacent to their Whole Foods locations. And I say that as a physician. Amazon: please destroy America's rotting, corrupt monstrosity of healthcare system!
    • SS
      Steve S.
      10 July 2018 @ 15:19
      @Christopher. Look at XRT? Yeh I did, 8% return YTD. And what was Amazon's YTD return? 50%+ No comparison really.
    • CM
      C M.
      10 July 2018 @ 20:10
      Discounting the need for consumers to actually talk to a pharmacist. This is key for my spouse as she takes lots of medications and needs to know about interactions. If you are on a long time drug and want to buy in volume, can see you getting it from Amazon. But shorter run prescriptions or people that want to interact with pharmacists, then the local drug store will be the thing. The key for Walgreens is drawing in traffic for their prescriptions, but people buying the convenience store items that are on the shelves. That is where drug stores make their money. Do believe the in-store clinics can be an interesting opportunity for things like flu shots, etc. Could put pressure on doctor offices.

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