Walgreens Boots Alliance (NASDAQ:WBA) traded -10% lower on Thursday morning, after Amazon (NASDAQ:AMZN) announced that it had agreed to purchase online pharmacy PillPack.
After recently joining the Dow Jones blue chip index, Walgreens began the day on a high note, reporting earnings per share of $1.35 and total revenue of $34.33 billion, above analyst expectations of $1.08 and $34.05 billion. Walgreens also announced a dividend hike and $10 billion in stock buybacks. Despite concerns about same store sales figures, WBA was trading 2.5% higher in premarket trading.
Then Amazon announced that it had agreed to buy a privately held online pharmacy called PillPack. WBA fell over 12% from its premarket high and other pharmacies such as CVS and Rite Aid fell around 10% as well. This is not unprecedented after Amazon decides to enter a new market, known as “Amazon effect.” Even the SPDR S&P Pharmaceuticals ETF (NYSE:XPH) was down 1%.
In analyzing the WBA weekly chart, we can see that it was trading in its rising phase, fairly early in the current market cycle. However, it has now broken below its cycle low, which is a bearish indicator for the price action remaining in this cycle. Further, the stock has been in poor technical condition, recently failing from resistance. In January, we added it to our "Riskiest of 2018" list. With so much time left in this cycle, our current target is $51 by mid-September.
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