Amazon Enters Online Pharmacy Business | Tesla Added To S&P 500

MarketBites Investment Newsletter for 11/18/2020

Your daily dose of stock market commentary and most important investment and business news. written by investment professionals at Taylor Hoffman Capital Management.

Quote of the Day
“The unexamined life is not worth living.”
– Socrates

Today’s Top Investment Stories
  1. Amazon Enters Online Pharmacy Business
  2. Tesla Added To S&P 500
What is driving the stock market today? – November 18th, 2020

– The stock market pulled back from record highs, as coronavirus cases overshadowed yesterday’s vaccine news. Treasury yields and U.S. dollar dipped on Fed Chair, Jerome Powell’s comments that the U.S. economy still has a “long way to go” before it recovers. Palantir rallied 12% on news that Steve Cohen’s Point72 bought 29.9 million shares in Q3 2020.

– Bloomberg finds that 20% of publicly traded companies in America are now in “zombie” status, with a record $1.4 trillion of debt. Zombie companies weigh down the economy, as they make just enough money to pay only interest on their debts. Many of these companies are kept alive by access to cheap debt.

Coronavirus tracker: Per Johns Hopkins, the U.S. reported 162,000 new cases yesterday, while Europe had 208,000 new cases. United States Covid hospitalizations are at 73,014.

– By Raymond Kanyo

Top Story 1: Amazon Pharmacy

What is Happening?
Amazon Pharmacy was just launched on the premise of making it easy and convenient to order prescription medications online. Amazon Prime members will gain access to a plethora of perks, such as free delivery and discounts. GoodRx, Walgreens, and CVS plunged 22.50%, 9.63%, and 8.59% on the news. Amazon climbed 0.15%.

Why does this Matter?
This announcement is well-timed by Amazon, as Americans are increasingly relying on medications by mail, to avoid possible virus exposure. The e-commerce giant has been gradually building out its infrastructure, in order to take a slice of the $300 billion pharmacy market. Amazon acquired PillPack in 2018, which helped build out online delivery.

Amazon Prime members will gain access to many benefits, such as:

  • Free 2-day prescription delivery
  • Online access to pharmacists
  • Prescription savings benefits – access to medications discounted as much as 50%-70% due to Amazon’s negotiating power with medical companies.

The Takeaway:
Amazon is poised to take market share in the $300 billion pharmacy industry with its offering. Amazon Pharmacy is yet another perk that is exclusively available to Amazon Prime members. Walgreens and CVS might be able to rely on their large physical-store footprint to combat Amazon Pharmacy, but GoodRx will now have to compete with Amazon to find better prescription pricing for clients.

– By Raymond Kanyo

Top Story 2: Tesla Joins The Big Dogs

What is Happening?

Tesla ($TSLA) has joined the S&P 500. The addition raises concerns over proper index handling and short-term price volatility. Many of the brightest minds in finance have commented.

Why does this Matter?

Tesla’s inclusion brings more questions and a few answers. Many believe the addition fortifies the future of electric vehicles. Adding Tesla to the S&P 500 gives credibility to the firm’s ability to consistently turn a profit. According to professor Aswath Damodaran, known as “the Dean of Valuation’ at the Stern School of Business, Tesla’s inclusion in the index actually helps companies like Ford and GM. The move provides the entire industry with a new wave of technology, and confidence in that technology. Such sentiment can send the industry to new highs.

The ability of Index funds to responsibly add Tesla worries some. There is a valid concern that the index is becoming too top-heavy, with mega-cap firms single-handedly moving the index on volatile days. Others worry that unless the indices have been purchasing the stock since the initial conflict of its inclusion, then the move could artificially inflate Tesla’s valuation.
The Takeaway:
Many accredited investors believe this is validating Tesla for the long term. It will be interesting to see how the index and investors handle Tesla now. What is for certain, is that Elon Musk will continue being himself as he pushes the limits.

– By Jack Dunne

What else is happening:
Retail still climbing, but slowly – (read here)
NIO shares fell after earnings – (read here)
Lumber shortage hits consumers – (read here)
U.S. industrials report – (read here)
Deals & IPOs:
Earnings Calendar:
Jack-in-the-Box ($JACK), L Brands ($LB), Lowe’s ($LOW), Nvidia ($NVDA), Target ($TGT)
BJ’s Wholesale ($BJ), Intuit ($INTU), Macy’s ($M), Qiwi ($QIWI), Williams-Sonoma ($WSM)
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