Monday, May 27, 2024

Barclays Identifies Block Inc. as Potential S&P 500 Addition – Vahid Karaahmetovic

Barclays analysts anticipate Block Inc., a financial technology company headed by Jack Dorsey, to be the next addition to the S&P 500 index during its upcoming quarterly rebalance on June 7th.

The positive net income of $472 million recorded by Block Inc. in the first quarter, coupled with its previous earnings, makes it a strong contender for inclusion, according to Barclays. While the decision isn’t guaranteed, Barclays analysts assert that Block Inc.’s stock, known as SQ, “screens well” for eligibility.

Block Inc., classified under “Financial Services” in the GICS Industry, stands out as a potential choice to address sector underweighting within the index. Barclays analysts believe that its $45 billion market capitalization positions it favorably for inclusion.

Barclays also points out that mergers and acquisitions (M&A) could fast-track Block Inc.’s inclusion into the S&P 500. Any vacancy created due to M&A activity among existing index members is promptly filled, potentially opening the door for Block Inc.

Regarding potential post-inclusion share price impact, Barclays analysts highlight historical trends. Typically, newly included S&P 500 stocks see a 7.7% surge in value leading up to the first trading day as an index member. However, this is followed by an average 1.0% decline in the four weeks thereafter.

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