What happened
Shares of CrowdStrike (CRWD 2.36%) surged this week after Nasdaq announced that it would add the cloud security leader to one of its most popular stock indexes.
As of the market close on Thursday, CrowdStrike's stock price was up 17%.
So what
CrowdStrike joined the Nasdaq-100 index on Thursday. It replaced integrated circuit manufacturer Maxim Integrated Products, which was acquired by semiconductor giant Analog Devices.
The Nasdaq-100 is a heavily traded growth stock index. Its components include 100 of the largest (by market cap) non-financial companies listed on the Nasdaq Stock Market. Major holdings include Apple, Microsoft, and Tesla.
Image source: Getty Images.
Now what
Managers of funds that track the NASDAQ-100 Index, such as the popular Invesco QQQ ETF, will now need to buy CrowdStrike's stock. Traders seeking to front-run this forced buying on the part of index funds likely also scooped up the cybersecurity specialist's shares. Together, these near-term trading dynamics no doubt contributed to CrowdStrike's gains this week.
Yet over the longer term, it's the fundamental performance of CrowdStrike's business that will drive investors' returns. Fortunately, as a leader in endpoint security, CrowdStrike possesses intriguing growth prospects. The need to secure end-user devices such as desktops, laptops, and smartphones has become more pronounced during the pandemic as more people work in nontraditional locations. CrowdStrike, in turn, is enjoying soaring demand for its services.
Investors can expect to receive CrowdStrike's latest revenue and earnings figures when it releases its fiscal 2022 second-quarter financial results on Aug. 31. If the cloud sentinel's growth metrics impress -- and recent trends suggest they will -- shareholders could be in store for even more gains in the coming days.
