Why AppLovin (APP) Stock Is Trading Up Today

What Happened?

Shares of mobile app technology company AppLovin (NASDAQ:APP) jumped 2.1% in the afternoon session after it continued its upward momentum following the announcement of its inclusion in the S&P 500 index. 

The stock initially surged nearly 12% on after the news broke. Inclusion in the prestigious index is a significant catalyst, as it compels passive funds and ETFs that track the S&P 500 to purchase AppLovin shares, creating structural demand for the stock. This addition also serves as a mark of credibility, often drawing increased attention from institutional investors. The positive move on Wednesday was also supported by broader market strength, as the S&P 500 and Nasdaq both trended higher. The company's recent strong financial performance, including 77% year-over-year revenue growth in the second quarter, has also bolstered investor confidence.

After the initial pop the shares cooled down to $565.74, up 1.4% from previous close.

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What Is The Market Telling Us

AppLovin’s shares are extremely volatile and have had 61 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 2 days ago when the stock gained 11.3% on the news that S&P Dow Jones Indices announced on Friday that the advertising technology company will be added to the benchmark S&P 500 index. The inclusion, which will take effect before the market opens on September 22, is a significant milestone for the company. Stocks typically rise on news of their inclusion in a major index because investment funds and ETFs that track the S&P 500 are required to purchase the company's shares to reflect the index's updated composition. This creates substantial, built-in demand for the stock from passive investors. AppLovin, along with Robinhood Markets and Emcor Group, will replace MarketAxess Holdings, Caesars Entertainment, and Enphase Energy in the widely followed index.

AppLovin is up 65.5% since the beginning of the year, and at $565.74 per share, has set a new 52-week high. Investors who bought $1,000 worth of AppLovin’s shares at the IPO in April 2021 would now be looking at an investment worth $8,676.

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