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Amazon.com Inc AMZN

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Adoption Will Take Time, but Amazon Pharmacy Unlocks Several New Growth Opportunities

R.J. Hottovy, CFA Sector Strategist

Analyst Note

| R.J. Hottovy, CFA |

The announcement of Amazon Pharmacy (a two-day prescription delivery plan available to all Prime members in 45 states) and the Amazon prescription savings benefit to Prime members should not come as a surprise, as they represent the logical next step in wide-moat Amazon's broader healthcare category. The move follows the 2018 acquisition of PillPack (which will remain a stand-alone service for customers managing multiple daily medications), Haven Healthcare (the employee healthcare partnership between Amazon, Berkshire Hathaway, and JPMorgan Chase), and Amazon Halo (a healthcare monitoring system) and should make Amazon a more significant healthcare player over time. We're not planning to change our five-year assumptions (22% average annual top-line growth, operating margins between 9% and 10%) or our $3,600 fair value estimate based on this development but see the move as strategically important for several reasons.

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Company Profile

Business Description

Amazon is among the world's highest-grossing online retailers, with $281 billion in net sales and approximately $365 billion in estimated physical/digital gross merchandise volume (GMV) in 2019. Online product and digital media sales comprised 50% of net revenue in 2019, followed by commissions, related fulfillment and shipping fees, and other third-party seller services (19%), Amazon Web Services' cloud computing, storage, database, and other offerings (13%), Prime membership fees and other subscription-based services (7%), product sales at Whole Foods and other physical store retail formats (6%), and advertising services and cobranded credit cards (5%). International segments constituted 27% of Amazon's non-AWS sales in 2019, led by Germany, the United Kingdom, and Japan.

Contact
410 Terry Avenue North
Seattle, WA, 98109-5210
T +1 206 266-1000
Sector Consumer Cyclical
Industry Internet Retail
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 798,000

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