Interactive Brokers (IBKR) stock jumped nearly 6% in after-hours trading yesterday, following S&P Dow Jones Indices’ announcement that it will be added to the S&P 500 index (SPX). The online brokerage firm will replace Walgreens Boots Alliance (WBA), which is set to be acquired by private equity firm Sycamore Partners. IBKR stock will join the highly coveted index before the market opens on Thursday, August 28.
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Meanwhile, electricity producer Talen Energy (TLN) will take Interactive Brokers’ place in the S&P MidCap 400 index. TLN shares rose over 4% on the news. On the other hand, investors in AdTech firm AppLovin (APP), trading platform Robinhood Markets (HOOD), and online used-car retailer Carvana (CVNA) were left disappointed, as these much-anticipated stocks were not added to the SPX despite high expectations from analysts and investors.
SPX Inclusion Is a Big Boon for Interactive Brokers
Interactive Brokers has proven its worth with a successful business model and a growing market capitalization. It operates an automated platform for trading and settling stocks, bonds, mutual funds, Exchange-Traded Funds (ETFs), precious metals, and cryptocurrencies. IBKR stock has surged over 42% year-to-date, significantly outpacing the broader market and meeting the index’s demanding requirements for market capitalization, liquidity, and profitability.
Interactive Brokers’ inclusion in the S&P 500 shows how index providers are highlighting fast-growing fintech firms, acknowledging the growing impact of digital financial services on capital markets. Recently, the Trade Desk (TTD) replaced Ansys in the SPX due to its acquisition by Synopsys (SNPS).
How Do Companies Qualify for Index Inclusion?
Companies added to the S&P 500 often see their shares surge on the news, as it opens doors to a broader investor base. Hedge funds, ETFs, and all passive funds that track the S&P 500’s performance are required to add these companies to their portfolios, increasing demand for the company’s common shares.
The SPX index typically rebalances its components quarterly, but replacements happen off-schedule if a company is acquired. To qualify for inclusion, a company must fulfill certain criteria, including reporting a profit in its most recent quarter and having cumulative profit over the trailing twelve months.
Is IBKR Stock a Buy or Sell?
Analysts remain highly optimistic about Interactive Brokers’ long-term outlook. On TipRanks, IBKR stock has a Strong Buy consensus rating based on five Buys and one Hold rating. The average Interactive Brokers price target of $67.92 implies 8.2% upside potential from current levels.
