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Will Inclusion in the Russell 1000 Index Aid Uber Stock?

Zacks Equity Research

Uber Technologies UBER has not performed as per expectations since the ride-hailing giant went public in May. In fact, shares of this Zacks Rank #3 (Hold) stock closed at its highest level of $46.38 on Jun 28 since the May 10 public debut (IPO price was $45). Uber also incurred a loss in its first quarter post commencement of trading on the NYSE, primarily due to high costs.

Uber Technologies, Inc. Price

Uber Technologies, Inc. Price

Uber Technologies, Inc. price | Uber Technologies, Inc. Quote

Notably, the inclusion of Uber into the highly sought-after US large-cap Russell 1000 Index provided a boost to this San Francisco-based company’s price performance. Uber’s inclusion into the index, which track’s the 1,000 largest companies in the United States, followed the completion of FTSE Russell indexes annual reconstitution on Jun 28.

We expect the upside in the stock price to continue in the coming days. Additionally, Uber’s membership in the Russell 1000 Index is likely to provide it with certain advantages. Russell indexes are widely used by institutional investors and investment managers not only for index funds but also as benchmarks for prudent investment strategies.

Apart from Uber, other stocks like Lyft LYFT, Beyond Meat BYND and PagerDuty PD that went public this year have been included in the Russell 1000 Index. According to media reports, the inclusion of the companies implies that index funds will have to pump in nearly $1 billion into these stocks as funds that track the Russell benchmarks need to buy them.

Also, the liquidity position of a stock is bound to improve owing to such investments. With such a huge amount of cash being invested in a stock (on being included in the Russell 1000 Index), we expect the likes of Uber to register a gain in the coming days.

However, the extent of stock price improvement and the time period for which it sustains is debatable. Consequently, we expect investors interested in Uber to remain focused on its share price movement going forward.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Lyft, Inc. (LYFT) : Free Stock Analysis Report
 
Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
 
PagerDuty Inc. (PD) : Free Stock Analysis Report
 
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
 
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