Amazon Moves to Pharma: Is it Time to Bail on Traditional Retailers?

Amazon.com, Inc. (NASDAQ:AMZN) announced in late June that it would buy the online pharmacy PillPack. The start-up generated roughly $100 million in revenue last year, but the move demonstrates that Amazon is very serious about its foray into pharmaceutical retail. Some of the larger pharmaceutical retailers saw their stocks plunge after the news broke, which may have reminded investors of the reaction grocery retailers had to its Whole Foods purchase.

CVS Health Corp. (NYSE:CVS) saw its stock drop below the $65 mark in late June but shares have since rebounded. The stock was down 1.22% in early afternoon trading on July 11. Shares are down 5.8% in 2018 so far. Aetna Inc. (NYSE:AET) shares also fell after Amazon made the announcement. Shareholders approved a merger in March with CVS taking control of Aetna for $69 billion.

The hope is that CVS will be able to pool resources in a fierce competition that is developing against Amazon and other giants in the health care space. The merger is still pending approval from the Justice Department but CVS and Aetna expect the deal to be concluded sometime in the second half of this year.

The merger should give CVS a short-term boost but Amazon represents an existential threat for traditional retailers regardless of industry. CVS will be subject to volatility due to changes in this industry, and investors should look elsewhere for growth and income.