What happened
Amazon (AMZN +2.16%) stock was pulling back today as a combination of reports that the company planned to make a bid for home healthcare specialist Signify Health (SGFY +0.00%) and a broader market sell-off on fears of rising interest rates weighed on the stock this morning.
As of 10:18 a.m. ET, Amazon stock was down 3.3%.
NASDAQ: AMZN
Key Data Points
So what
Over the weekend, The Wall Street Journal reported that Amazon was among the bidders angling to take over Signify Health, which said in early August that it was open to an acquisition. That news sent shares of Signify, which provides technology to help in-home care providers, up nearly 40%, but Amazon was moving in the opposite direction. The tech giant is up against CVS Health and UnitedHealth in what is shaping up to be a bidding war that could value the home healthcare company at more than $8 billion. Bids are due around Labor Day, according to the Journal.
Amazon's interest in Signify comes just weeks after it acquired 1Life Healthcare, which operates the One Medical primary care practice, and its purchase of iRobot, best known for its Roomba robotic vacuum. Amazon has a long history of acquisitions, but a new takeover every few weeks could complicate the company's operations, as absorbing a separate company takes time and attention. New CEO Andy Jassy has been at the helm for only a year, and investors may be concerned that he'll dilute the company's strategy with too many acquisitions. Investors are also mindful that botched deals have felled past tech heavyweights.
Additionally, the stock seems to be down at least partly on broad market sentiment, as the Nasdaq was off 2% this morning. Among the concerns is a new survey showing it will take two years or longer for the Fed to bring inflation down to its 2% target, implying ongoing rate hikes and an increasing likelihood of a recession.
Now what
Amazon is big enough that it can afford to make a mistake with a pricey acquisition, but investors should keep an eye on the Signify takeover, as its market cap ballooned to $8.4 billion on the reports of Amazon's interest. That could make it the company's priciest acquisition to date after its $13.7 billion buyout of Whole Foods. Amazon also bought Hollywood studio MGM for $8.5 billion earlier this year.
Signify is profitable, making it less risky than other deals, but the move is primarily a bet on Amazon's growth potential in the healthcare industry.
