What happened
Shares of Calix (CALX 1.10%) jumped today on news that it would be added to the S&P MidCap 400 index.
The stock closed up 14.5% as a result.
Image source: Getty Images.
So what
The cloud software company's addition to the S&P index means that index funds that track the mid-cap index will have to add the stock to their holdings, triggering demand for it.
Calix will replace CIT Group in the S&P MidCap 400 prior to the market opening on Jan. 4.
Indexes adjust their holdings from time to time to reflect changes in the size of their holdings, so the addition of Calix reflects the stock's growth in recent years as the stock has jumped 163% so far this year. Since the beginning of 2020, Calix is up 900% as it's been a huge winner during the pandemic. Following today's jump, the stock reached a market cap of $5 billion, squarely in mid-cap territory, which is generally defined as a market value between $2 billion and $10 billion.
Now what
Calix specializes in bandwidth access, helping communications companies manage bandwidth and better serve their customers. The company has benefited from the boom in online connectivity demand as usage for videoconferencing apps like Zoom has skyrocketed during the pandemic, and its revenue has surged over the last two years.
That boom seems to be fading as revenue growth slowed to 14% in the most recent quarter, but the growth was enough to attract the attention of the S&P. The stock could pop again next Tuesday when index funds add the stock to their holdings.
