Why AI Stock AppLovin Powered Past the Market on Wednesday
Key Points
The company has a fine chance of being included on one of the most closely followed stock indexes.
That, at least, is the evaluation of one professional research team.
10 stocks we like better than AppLovin ›
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.
Image source: Getty Images.
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.
Should you invest $1,000 in AppLovin right now?
Before you buy stock in AppLovin, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AppLovin wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $656,825!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $865,550!*
Now, it's worth noting Stock Advisor's total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor.
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