The Trade Desk (TTD) stock is up nearly 10% in intraday trading at the time of writing, following S&P Dow Jones Indices’ announcement that it will be added to the S&P 500 index (SPX). The stock also soared by nearly 15% in pre-market trading today. Trade Desk is set to replace outgoing component Ansys (ANSS), which is expected to be acquired by another SPX component, Synopsys (SNPS), on July 17. TTD stock will be added to the highly coveted index before the market opens on July 18.
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On the other hand, shares of AdTech firm AppLovin (APP) and trading platform Robinhood Markets (HOOD) fell in extended trading yesterday. Investors were disappointed that these stocks were not added to the SPX index. Analysts and investors had been closely watching them because there was high expectation that these companies would join the index. APP stock fell as much as 3.1%, while HOOD stock dropped 1.4% immediately following the news.
SPX Inclusion Is a Big Boon for Trade Desk
Companies added to the SPX often see their shares surge on the news, as it opens doors to a broader investor base. Hedge funds, Exchange-Traded 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 in the event of a company’s acquisition, the index replaces components off schedule. On July 9, Datadog (DDOG) replaced Juniper Networks in the SPX due to its acquisition by Hewlett Packard Enterprise (HPE).
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. Trade Desk has proven its worth with a successful business model and a growing market capitalization. TTD operates a cloud-based platform that allows buyers to create, manage, and optimize data-driven digital advertising campaigns. Joining the S&P 500 will represent a major milestone in The Trade Desk’s ongoing growth journey.
Is the Trade Desk a Good Stock to Buy?
On TipRanks, TTD stock has a Strong Buy consensus rating based on 23 Buys, four Holds, and one Sell rating. Also, the average Trade Desk price target of $87.63 implies 16.2% upside potential from current levels. Unfortunately, TTD stock has lost 35.8% so far this year.
