A Jefferies analyst cut his price target on Walgreens to $65 from $85 in the wake of Amazon's foray into the healthcare industry with its $1 billion acquisition of mail-order pharmacy PillPack on Thursday. He also downgraded his recommendation on the stock to "hold" from "buy."
Analyst Brian Tanquilut predicted in a note that Amazon will threaten Walgreens' earnings in a couple years and prevent it from "seeing meaningful stock upside" near term. The risk PillPack poses to Walgreens is minimal because of its small market share, but that risk will increase when Amazon finds a way to better integrate PillPack "into its consumer offerings."
Tanquilut wrote PillPack can dispense prescription medication in every state, but that Amazon will start dispensing in the company's Prime markets for right now. He estimated the overlap between Walgreens stores and Amazon's Prime Now markets will affect 2,380 locations or 25% of Walgreens' U.S. store base, according to the note. That number could grow as Amazon's offerings expand into more areas.
Walgreens currently has nine "buy" and 11 "hold" recommendations from analysts, according to FactSet. Eight analysts lowered their price target for Walgreens on Thursday.
Walgreens fell almost 10% in trading on Thursday, June 28, after Amazon's announcement sent a ripple though the drug retail industry. Rite Aid Corp. (RAD) tumbled 11% to %1.76 a share and CVS Health Corp. (CVS) fell 6.1% to $65.78 a share.
Early Friday, Walgreens was rising 0.84% to $60.20.