Datadog to Join S&P 500. What It Means for the Stock.

Datadog provides customers with a single dashboard for viewing all of their cloud activity. (Dreamstime)

On Wednesday after the close of trading, S&P Dow Jones Indices announced that Datadog would replace Juniper Networks on the S&P 500 index beginning on July 9. Juniper was acquired by Hewlett Packard Enterprise earlier in the day.

Datadog stock was up 8.7% in Thursday premarket trading following the announcement. Investors often rush into stocks when they are included in major indices because some managers of some funds must buy shares. This includes exchange-traded funds that track the S&P 500, such as the SPDR S&P 500 ETF, with $634 billion under management.

Datadog provides customers with a single dashboard for viewing all of their cloud activity, including servers, applications, databases, and security. It has a market capitalization of $50 billion.

Datadog is a rare bird among mid-stage business software companies: It grows quickly, but also turns a profit. Consequently, the stock has a high valuation of 13 times sales per share. The S&P 500 trades at three times.

Prior to the announcement, Datadog shares were down 5.5% on the year, compared with the S&P 500, which was up 5.4%.

Write to Adam Levine at adam.levine@barrons.com