Summary
- McKesson’s share price has reacted negatively on news of Amazon’s entry into the pharmacy space. I see this reaction as being unwarranted.
- Meanwhile, McKesson continues to show operating strength, and the tentative opioid litigation settlement removes an overhang.
- I find the shares to be undervalued, based on my valuation model.
The healthcare sector was rocked by the news on Nov. 17th, that Amazon Pharmacy (AMZN) will allow customers in the U.S. to order prescription medications for home delivery, including free delivery for Amazon Prime members. McKesson (MCK) was not immune to negativity from the investment community. Since the close of trading on Nov. 16th, McKesson’s share price has dropped by 8%, to $169.03 as of writing. I believe this negativity is overblown, and in this article, I show what makes McKesson an attractive buy at the current valuation, so let’s get started.
