Becoming a member of the S&P 500 (SNPINDEX:^GSPC) index is a huge milestone for any growing company. Having S&P Dow Jones Indices, which manages the S&P 500, add your company to the index proves that you’ve truly arrived — and it opens the door to the trillions of dollars that institutional and individual investors put into S&P 500-tracking index funds and ETFs…
Tesla (NASDAQ:TSLA) just found out that it will become the newest member of the S&P 500 in late December. The move ends months of speculation about when the electric vehicle pioneer would get added. The stock is soaring as a result.
Yet with the Tesla announcement behind us, investors want to know which companies might be next. Below, you’ll find three strong candidates worthy of consideration in the near future.
1. Zoom Video Communications
If Tesla and its nearly $400 billion market cap hadn’t been at the top of investors’ minds, people would’ve wondered when Zoom Video Communications (NASDAQ:ZM) would finally join the S&P 500. The video conferencing platform provider has become a household name across the globe. It has a market capitalization of more than $110 billion, putting it well above many current S&P 500 stocks.
Zoom just went public in early 2019, but it has already met many of the requirements that S&P Dow Jones puts on joining in the S&P 500. The one that trips up many new would-be entrants is the need to have four consecutive quarters of profitability. However, Zoom has generated positive net income in each of the past six quarters. It has also increased its float over time, making its shares liquid enough to meet the needs of the institutional investors that will trade heavily in S&P component stocks.
Zoom’s prospects for S&P inclusion in the near future look good. Even if the stock pulls back once the coronavirus crisis comes to an end, Zoom has a wide margin before its value would fall enough to warrant not becoming an S&P stock.
Electronic payment specialist Square (NYSE:SQ) isn’t as big as Zoom. Nevertheless, the financial company has made a big splash, challenging established payment processing companies and aiming to offer services to businesses of all sizes.
With a market capitalization of more than $80 billion, Square is certainly large enough to deserve entry to the S&P 500. It has ample share float and has generally been profitable throughout 2019 and 2020.
However, like many companies, Square ran into some challenges during the early part of the COVID-19 pandemic. After two quarters of rising profit to end 2019, Square had a…
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