Amazon and Everybody Else

Pharmacy distributor stocks plunge, Amazon stock falls, then rises

The last week in October was a wild ride for pharmaceutical distribution companies after Amazon, the online retail behemoth, reportedly obtained wholesale pharmacy licenses in 12 states. Amazon itself went down and up on the stock market.

On October 27, stock prices dropped for several drug distribution companies, including CVS, Cardinal Health, AmerisourceBergen and McKesson, reported Rani Molla in Recode. Later that day, the Wall Street Journal related that CVS is interested in buying health insurer Aetna for $66 billion, which appears to have alleviated CVS’s stock drop. Meanwhile, AmerisourceBergen and Cardinal Health stocks dropped about 10 percent, and McKesson stock dropped 13 percent. Prices had rebounded somewhat by October 30.

Amazon itself saw its shares drop when earnings fell short of analyst predictions, according to a CNBC report by Christine Wang. Amazon reported third-quarter earnings per share of 52 cents on revenue of $32.71 billion. A Thomson Reuters consensus estimate claimed that financial analysts anticipated Amazon to have earnings of 78 cents per share on revenue of $32.69 billion. On October 27 Amazon stock dropped more than 5 percent in extended trading. During that time more than 1.6 million shares were moved.

Amazon recorded $18.87 billion in North America sales during the quarter, but financial analysts projected $19.09 billion, reported FactSet. The same source said that international sales were $10.61 billion, which was higher than Wall Street projections for $10.44 billion.

According to the CNBC report, “In the second half of the year, Amazon has increased its investments in its fulfillment centers and video content, CFO Brian Olsavsky said in a Thursday earnings conference call. He said that this spending is a ‘step-up’ compared to what Amazon did in the first half of the year or the second half of last year.”

For the holiday season Amazon projected an outlook that came in somewhat less than analysts' expectations: the company anticipates fourth-quarter sales between $42 billion and $45.5 billion, which came in at less than Wall Street expectations for fourth-quarter sales at approximately $44.58 billion, according to Thomson Reuters. Meanwhile, FactSet reported that Amazon Web Services (AWS), Amazon's cloud computing business, accounted for revenue of $3.23 billion in revenue during the quarter. Wall Street projected that AWS would have $3.17 billion in sales during the quarter. The operating margin for AWS rose to 31.6 percent, which was up from 29.9 percent in the prior quarter.

By October 30, Amazon stock had risen 13.2 percent for the day, reported Zacks Equity Research. The jump was based on “solid volume with far more shares changing hands than in a normal session,” the report said, adding “ This breaks the recent trend of the company, as the stock is now trading above the volatile price range of $957.10 to $1,009.13 in the past one-month time frame. The move came after the company reported better-than-expected third-quarter 2017 results.”

As Molla said, “It’s tough being everyone else. Amazon has proven time and again it has the power to move markets.”

In a strange coincidence of timing, I interviewed Darshan Kulkarni one day before Amazon made it's announcement. You can see that video below.