Why Amazon Should Buy CVS Health

CVS Health Corporation reported quarterly earnings before the open this morning. The stock traded slightly higher before the opening bell after a slight beat on earnings per share. The drug store chain narrowed guidance, as it was hurt by the major hurricanes that hit Texas and Florida.

CVS and health insurer Aetna Inc. re attempting to finalize a merger in what is reported to be a deal worth $70 billion, which could be announced in December. Analysts say that this deal would likely value shares of Aetna at more than $200 per share. Shares of CVS were hurt by the recent announcement from Amazon.com, Inc. that it was planning to offer prescription drugs online. (See also: CVS-Aetna Deal Prompted by Amazon’s Drug Moves.)

If Amazon were to buy CVS and Aetna, it would be a consolidator of the health services industries that would reduce healthcare costs on Main Street USA and could solve some of the problems related to Obamacare.

Integrating CVS pharmacy benefits management solutions with the health insurance choices of Aetna over the online platform of Amazon would be a winning combination. Amazon has more than 90 million Prime members, who pay $99 per year or $10.99 per month for the service. Prime members account for just 63% of Amazon buyers, giving the online retail giant an audience of nearly 143 million U.S. consumers. A recent survey showed that 44% of all online retail orders occur on the Amazon.com platform.

If Amazon owned CVS Health and Aetna, the e-commerce giant would have a footprint in approximately 9,700 CVS locations in the U.S., but only 1,000 or so have the Minute Clinic. The Minute Clinic should be expanded to all stores as a government-sponsored location for patient visits. The goal would be to drastically reduce expensive emergency room visits at our nation’s hospitals. This combination would reduce the cost of prescription drugs, provide basic diagnostic and treatment care, and provide Amazon Prime members with cheaper health insurance options. (For more, see: How CVS Makes its Money.)

CVS locations could become pre-ER diagnosis and treatment facilities, a place to buy cheaper prescription drugs, and a location to sign up for healthcare insurance. Stores could be redesigned as delivery hubs for some products bought on Amazon.com and for local returns. Here are the weekly charts and some tips on how to trade these stocks.

As a consolidator, Amazon could reduce healthcare costs on Main Street and solve some problems related to Obamacare. …read more

Read more here: Why Amazon Should Buy CVS Health

Category: CVS, AET, AMZN

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