AppLovin (APP) and Robinhood Markets (HOOD) witnessed their shares surge approximately 7% in after-hours trading on Friday, propelled by the announcement from S&P Global that both companies would be joining the prestigious S&P 500 index.
The inclusion, set to take effect before the market opens on September 22nd, will see AppLovin replacing MarketAxess Holdings (MKTX), and Robinhood stepping in for Caesars Entertainment (CZR), according to the S&P Global statement. This move marks a significant validation for both companies, particularly Robinhood, which has faced scrutiny regarding its market volatility and business model sustainability.
The path to S&P 500 inclusion wasn't without its hurdles. In March, short-seller Fuzzy Panda Research publicly voiced concerns, advising the S&P 500 selection committee against adding AppLovin to the index. This followed a 15% drop in AppLovin shares in December when Workday was selected instead. Robinhood also experienced a 2% dip in June upon being overlooked during a prior quarterly index rebalancing, underscoring the intense competition for index inclusion.
While the S&P 500 has recently broadened its tech exposure with additions like Datadog (DDOG) and DoorDash (DASH) earlier this year, the inclusion of AppLovin and Robinhood presents unique considerations. AppLovin operates in the increasingly competitive mobile advertising technology sector, and its future performance hinges on its ability to deliver verifiable ROI for advertisers and effectively navigate potential privacy regulation updates. Robinhood, on the other hand, must demonstrate consistent profitability and user retention in a market increasingly saturated with trading platforms. Their inclusion raises questions about the S&P 500's strategic direction, particularly regarding its emphasis on high-growth tech companies with relatively short track records compared to traditional industrial benchmarks.
Historically, stocks experiencing index inclusion typically see an immediate uptick in share price. This phenomenon stems from the need for index-tracking fund managers to purchase shares to accurately mirror the index's composition. However, the actual long-term benefits are more nuanced. While inclusion often generates positive investor sentiment and increases trading volume, it doesn’t guarantee sustained growth or improved financial performance. How AppLovin and Robinhood use this new influx of visibility and investment will be key to their sustained growth.
Both AppLovin and Robinhood became publicly traded companies on the Nasdaq in 2021.
Robinhood gained rapid popularity among retail investors, who actively traded meme stocks like AMC Entertainment (AMC) and GameStop (GME) through its platform. While this influx of millennial and Gen Z traders initially boosted Robinhood's app and revenue, it created an atmosphere of high intensity trading and increased scrutiny for the platform.
AppLovin's stock performance has also been notable, gaining significant ground with a 278% increase in 2023 and over 700% in 2024. However, year-to-date in 2025, the stock had only gained 51% as of Friday's close, indicating a potential deceleration in its growth trajectory. AppLovin's core business revolves around providing targeted advertising solutions for mobile apps and games.
Earlier this year, AppLovin explored the possibility of acquiring the U.S. TikTok business from its parent company, ByteDance, showcasing the company's ambition and strategic intent to expand its market reach. Current U.S. administration actions have previously involved extending deadlines for divestiture, emphasizing the complex regulatory landscape faced by multinational technology companies operating in the social media space that both companies will have to take into account.
During Robinhood's annual general meeting in June, CEO Vlad Tenev addressed a shareholder question regarding the company's ambitions for S&P 500 inclusion.
"It's a difficult thing to plan for," Tenev noted, "I think it's one of those things that hopefully happens."
He expressed his belief that the company met the necessary eligibility criteria.
In contrast to the upward trajectory of AppLovin and Robinhood, MarketAxess, specializing in fixed-income trading, has experienced a 17% decline year-to-date, while Caesars Entertainment, operating in the hospitality and gaming sector, has seen a 21% decrease in share value. These divergent performance trends highlight the ever-changing dynamics of the market influence of the S&P 500.
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