Shares of CrowdStrike (NASDAQ: CRWD) were trading higher on Monday. The cloud-based endpoint security specialist rose as much as 9.9% in early trading and was still up 9.1% at 11:58 a.m. ET.
The catalyst that sent cybersecurity stocks soaring was the announcement that it would join one of the major trading indexes.
Join the S&P 500
A statement released after the market closed on Friday revealed that CrowdStrike would be joining the market S&P500. The stock will be replaced Robert Half when the market opens on Monday 24 June. In a press release highlighting the change, S&P Global noted: “The changes ensure that each index is more representative of its market capitalization range.”
To be eligible to participate in the S&P 500, a company must be a U.S.-based company with a market capitalization of at least $8.2 billion. In addition, at least 50% of the outstanding shares must be publicly traded, and the company must have been profitable in the most recent quarter and cumulatively profitable over the past four quarters.
Stocks often rise in response to their addition to one of the major indexes, because institutional investors and funds that track these benchmarks must buy the stocks to match the composition of the indexes. That does not mean that anything has changed in the underlying company. Rather, this is a recognition that the operational and financial excellence that helped the company meet eligibility requirements is likely to make it a good investment in the future.
Roots in Artificial Intelligence (AI)
The increased focus on artificial intelligence (AI) in the past year has also put CrowdStrike in the spotlight, as the company has long used machine learning and other forms of AI to combat the growing number of hacks, breaches and other unauthorized systems. access.
Just last week, the company continued its relentless climb higher. For the first quarter of fiscal 2025 (ended April 30), CrowdStrike generated revenue that grew 33% year over year to $921 million, while adjusted earnings per share of $0.93 rose 67%. The company continues to generate strong operating and free cash flow and add customers.
For these reasons and more, CrowdStrike stock is a buy.
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Danny Vena has positions in CrowdStrike. The Motley Fool holds and recommends positions in CrowdStrike. The Motley Fool recommends Robert Half. The Motley Fool has a disclosure policy.
Why CrowdStrike Stock Surged on Monday was originally published by The Motley Fool
