What happened
Shares of solar energy stock SunPower (SPWR -2.21%) jumped as much as 12.3% in trading on Friday after announcing that it will join the S&P MidCap 400 next week. Shares are still up 11.2% as of 12:20 p.m. EDT.
So what
SunPower will replace Cimarex Energy, which is being acquired by Cabot Oil & Gas, in the index. The change takes effect on Tuesday, October 5, 2021.
Image source: SunPower.
The reason shares often jump when announcements like this are made is because funds that follow an index like the S&P MidCap 400 will need to buy shares to get exposure to SunPower stock. That can lead to natural buying from the funds themselves as well as from piggyback investors trying to ride the wave of momentum.
Now what
There isn't fundamentally any change to SunPower's business today, but there was an obvious trading impact. Investors are betting that being included in a large index will lead to more demand for shares, potentially pushing the stock higher.
I'm more concerned with third quarter 2021 financial performance, which we will learn about when the company reports earnings later this month or early next month. That's when we'll find out if the company's residential and commercial solar strategy is gaining traction and that's what long-term investors should keep their eyes on.
