Palo Alto Networks will replace Dish Networks (DISH) as part of the index's quarterly rebalancing on June 19, S&P said in a release late Friday. Palo Alto Networks will join the Information Technology (XLK) sector of the S&P 500. Palo Alto Networks will be the sixth addition to the index this year.
The stock of the cybersecurity company hit a 52-week high on May 24 after boosting the low end of its full-year revenue forecast along with its first quarter earnings release.
Shares of Palo Alto Networks have outperformed the S&P 500 this year. Palo Alto Networks is up more than 55% this year while the S&P 500 has risen 11.5%; Dish stock has fallen more than 48% over that period.
Companies often see their stock rise upon inclusion in the S&P 500, as an estimated $15 trillion benchmarked to the index creates forced buyers of the stock. Products like index funds and ETFs that track the S&P attempt to own each stock in the index at their equivalent weighting in the index. Investors cannot invest directly in an index.
The rise in Palo Alto Networks stock comes as concerns ebb over spending in areas like cloud computing, which had pressured markets last year. During the company's earnings call on May 23, Palo Alto CEO Nikesh Arora noted that while the macroeconomic environment is "still hard," his company is finding ways to fight through.
"The overall macro trends of cautious spending, deal scrutiny, and cost and value consciousness persist," Arora said on the call.
"Moreover, the behavior continues to be more widespread across a larger swath of our customers. Against this backdrop, we have been staying ahead with rigorous execution. We've increased our own deal scrutiny, gotten ahead of the challenges, and continue to sharpen our business value focus while demonstrating superior security outcomes to our customers."
Wall Street is also bullish on the S&P 500's newest name, with 41 analysts rating the stock at a Buy or equivalent rating, six analysts keeping a Hold or equivalent rating on the stock, and no analysts rating shares a Sell, according to data from Bloomberg. The consensus price target among analysts is $236, reflecting roughly 8% upside in the stock.
Josh is a reporter for Yahoo Finance.