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Buy Thermo Fisher On Amazon Fear-Inspired Dip

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Buy Thermo Fisher On Amazon Fear-Inspired Dip

Shares of Thermo Fisher Scientific Inc. (NYSE: TMO) came under heavy selling pressure last Friday, which continued into Monday's trading session amid ongoing concerns that Amazon.com, Inc. (NASDAQ: AMZN) is looking to enter lab supplies and other health care related businesses. But Thermo Fisher's shareholders shouldn't be concerned, at least according to Leerink's Puneet Souda who maintains an Outperform rating on Thermo Fisher's stock and recommends investors buy shares on the dip.

Thermo Fisher's "unmatched scale" will certainly pose a challenge for Amazon should it enter the space, the analyst wrote (see Souda's track record here). But it is unlikely in the first place Amazon will try to take over Thermo Fisher's market, as this has been an ongoing on-and-off rumor for the past six years.

In fact, it would be challenging for Amazon to try and take over the channel for four reasons, including:

    1. Lab supplies is a very small market at $15 billion as opposed to a $300 to $400 billion PBM market Amazon may find more lucrative.
    2. TMO's stickiness would be very hard for anyone to break.
    3. Low-value purchase orders are streamlined to Thermo Fisher in a way that Amazon may not be able to replicate.
    4. Thermo Fisher deals with complex products that require large sales and support teams.

Finally, it is difficult to imagine a scenario where Amazon supplies restriction enzymes, proteases, QPCRs, sequencing supplies, Nanodrops and LC-MS products.

"We believe AMZN is fully capable of supplying orders of IT hardware and has taken share from CDW-G (the government/academic IT hardware provider) among universities and government accounts, but same cannot be said for Fisher's catalog (Catalog LINK) just yet," the analyst also stated.

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Latest Ratings for AMZN

DateFirmActionFromTo
Oct 2019MaintainsBuy
Sep 2019MaintainsOverweight
Sep 2019MaintainsOutperform

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