The so-called “index effect” can boost a stock’s price if only temporarily (at best). The possibility of graduating to a major stock index was a key factor driving up the value of adtech company AppLovin (NASDAQ: APP) on Hump Day. Its shares closed just shy of 5% higher that trading session, which looked particularly impressive next to the S&P 500 index’s basically sideways trajectory.
Time for a rebalancing
Speaking of the S&P 500, that benchmark stock index is slated to get its regular adjustment this coming Friday, June 6 after market close. With 500 titles, the company that manages it, S&P Dow Jones Indices, typically swaps out several stocks for fresh titles when making such adjustments.
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AppLovin is an excellent candidate for S&P 500 inclusion for the upcoming changes, at least in the eyes of Bank of America analysts. The bank issued a research report flagging several stocks it believes could be newly included on the index, including AppLovin.
While that’s encouraging, AppLovin isn’t Bank of America’s “prime candidate” for S&P 500 index inclusion. That honor goes to next-generation online securities brokerage Robinhood Markets. Additionally, the bank mentioned no less than 12 other stocks as having a better-than-average chance of advancement, including Carvana and Interactive Brokers Group.
Buyer — or seller — beware
While the Bank of America report certainly counts as informed speculation, at this point it’s only that — speculation. AppLovin stock observers, be they bulls or bears, would be well advised not to trade the stock on that basis alone and instead focus on the company’s fundamentals.
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Bank of America is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppLovin, Bank of America, and Interactive Brokers Group. The Motley Fool recommends the following options: long January 2027 $175 calls on Interactive Brokers Group and short January 2027 $185 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy.
