Market News

Now, Amazon (NASDAQ:AMZN) Joins the Race to Buy Signify Health, Boost Revenue

Story Highlights

E-commerce giant Amazon.com is eyeing to expand into the healthcare market by acquiring Signify Health. It also has plans to boost its revenues from an exclusive event for its Prime customers and deal with cost inflation by passing on some cost burden to its third-party sellers in the U.S. and Canada. 

Online retail giant Amazon.com, Inc. (NASDAQ:AMZN) has joined the race to acquire Signify Health, Inc. (NYSE:SGFY), per a Wall Street Journal report. Also, the company is taking initiatives to boost its top line and operating performance.

Shares of $1.4-trillion Amazon slipped 2.9% to close at $138.23 on Friday. The stock has declined 18.9% so far this year.

Amazon’s Pursuit of Signify Health

Signify Health, a Texas-based healthcare technology provider, has been a hot buyout target since it expressed its intention to explore strategic alternatives earlier this month. Citing people with knowledge of the matter, the WSJ report stated that a possible sale could value Signify Health at $8 billion. This could give a big boost to the shareholders of Signify Health, which presently has a market capitalization of just $5 billion. Interestingly, the company started trading on the stock exchange in February 2021.

The buyout of Signify Health is expected to help Amazon expand its footprints in the healthcare market, especially in medical services. The retail giant’s interest in the healthcare market was confirmed after it agreed to acquire 1Life Healthcare Inc. (NASDAQ: ONEM) in July this year. The deal has been valued at $3.9 billion.

Before Amazon, Rhode Island-based CVS Health Corporation (NYSE: CVS) showed interest in Signify Health. It is worth noting that CVS Health is already an established player in the medical services market.

The $136.6-billion company provides insurance and pharmacy benefits manager-related healthcare services. Also, it operates a network of retail pharmacy chains.

Amazon Is Focusing on Boosting Its Revenues

Inflation in transportation, fuel, and energy costs is eating into the company’s profits. To deal with this issue, the e-commerce company has decided to hike fees for third-party sellers (Canada and the U.S.) operating from its platform. For its shipping services, Amazon will levy a holiday peak fulfillment fee for a period starting from October 15, 2022, and ending on January 14, 2023, says the report.

Additionally, Amazon might consider hosting a second event, like Prime Day, for its Prime customers in the fourth quarter. After its annual Prime Day in July, this initiative could significantly boost the company’s top line in the fourth quarter.

Is Amazon Stock Rated a Buy?

On TipRanks, analysts are unanimously optimistic about the prospects of Amazon, which commands a Strong Buy consensus rating based on 39 Buys and one Hold. AMZN’s average price target of $176.04 reflects 27.35% upside potential from the current level.

Investor sentiments are also Very Positive on AMZN, as evident from a 3.9% increase in the number of portfolios holding the stock in the last 30 days. Notably, the top portfolio count has grown 6.6% in the same period.

Prospects of this online retail giant appear bright for the third quarter of 2022. According to TipRanks, the total estimated visits to the company’s websites (including amazon.com) have increased 11.9%, as of July 22, month-over-month. The company’s monthly growth was 9.7% in June 2022.

For the third quarter of 2022, the company forecasts revenues to be within the $125-$130 billion range. This represents year-over-year growth of 13% to 17%. However, the company anticipates operating income of $0-$3.5 billion for the quarter versus $4.9 billion recorded in the year-ago quarter.

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