To The Moon

$Robinhood(HOOD)$ $AppLovin Corporation(APP)$

When the S&P Dow Jones Indices committee updates the most-watched benchmark in the world, Wall Street pays attention. This month, Robinhood Markets (HOOD) and AppLovin (APP) will join the S&P 500, cementing their status as U.S. large-cap players. On the surface, it looks like a victory lap for two companies that defied skeptics. But as history shows, index inclusion often raises a new question: should investors celebrate and buy, or treat this as a textbook “sell the news” moment?

Why S&P 500 Inclusion Matters

The S&P 500 is the most influential equity index on the planet, tracked by over $7 trillion in assets directly and influencing trillions more indirectly. For companies, inclusion carries three major benefits:

1. Prestige: Being added to the S&P 500 signals that a firm has reached the upper echelon of corporate America.

2. Liquidity: Index funds and ETFs that mirror the S&P must purchase the stock, creating automatic institutional demand.

3. Investor Base Expansion: Many pension funds and retirement accounts benchmarked to the index will now own the stock, broadening its shareholder pool.

But prestige can be a double-edged sword. In some cases—Tesla in 2020 being the best-known example—stocks soared on the announcement but stumbled in the months that followed, as excitement gave way to reality.

Performance Snapshot: Two Market Darlings

Before evaluating their S&P debut, let’s put Robinhood and AppLovin’s market journey into perspective.

• Robinhood (HOOD): Shares have surged more than 200% year-to-date in 2025, fueled by a rebound in retail trading activity and renewed interest in crypto markets. The stock has regained favor among younger investors, the very base that once propelled meme stock mania.

• AppLovin (APP): The mobile adtech powerhouse has staged one of the most impressive rallies in recent market memory. After climbing 278% in 2023 and an astounding 700% in 2024, the stock has cooled, up 68% so far in 2025. While the pace has slowed, its long-term performance remains extraordinary.

The question is not whether these stocks earned their spot, but whether investors should chase them now that institutional flows are all but guaranteed.

Robinhood vs. AppLovin: Divergent Business Models

Robinhood: Trading Cyclicality in a Retail-Centric World

Robinhood is best known for its role in democratizing investing. Its zero-commission model upended the brokerage industry, forcing incumbents like Schwab, Fidelity, and E*TRADE to follow suit. Beyond stocks, Robinhood has leaned into options trading and cryptocurrency to capture additional revenue streams.

But the firm’s biggest challenge remains its dependence on trading volumes. When retail enthusiasm surges, Robinhood thrives. When markets quiet down, revenue dips. That cyclicality makes it a less predictable earnings generator compared to more established financial institutions.

To its credit, Robinhood has improved financial discipline, cut costs, and expanded product offerings into retirement accounts, credit cards, and cash management. Yet, critics argue the company’s fortunes remain too tightly tethered to speculative cycles—hardly the hallmark of a stable S&P constituent.

AppLovin: Riding Secular Adtech Tailwinds

AppLovin, in contrast, sits at the heart of mobile monetization. Its software platform helps developers place targeted ads inside games and apps, improving both user engagement and revenue per download.

Unlike Robinhood’s cyclical dependence, AppLovin’s model benefits from secular growth in mobile advertising, which continues to expand even in slower economic environments. Global ad spending on digital channels is expected to surpass $700 billion by 2026, with mobile capturing the lion’s share. AppLovin has positioned itself as a gatekeeper of that ecosystem.

Its Axon ad engine, powered by AI-driven targeting, gives it a competitive edge that scales with every app and developer onboarded. That scalability, paired with strong operating margins, suggests greater staying power than Robinhood.

The “Sell the News” Dilemma

S&P 500 inclusions are notorious for producing short-term excitement but mixed long-term results. Why? Because:

• Index funds are forced buyers. Once the rebalance occurs, that structural demand disappears.

• Speculators front-run the trade. Traders often buy in anticipation of ETF demand, then sell immediately after inclusion.

• Valuation concerns emerge. Stocks often enter at stretched multiples, setting up underperformance once fundamentals reassert themselves.

Historical Examples:

• Tesla (TSLA): Soared into its 2020 inclusion, then lagged the S&P over the following year.

• Moderna (MRNA): Entered in 2021 after a blockbuster vaccine run, only to slide as COVID demand waned.

• Nvidia (NVDA): Joined earlier in its journey and went on to dominate the index, proving that not all inclusions end badly.

The lesson: index inclusion validates size and momentum, not durability. Investors must judge the underlying business, not the benchmark headline.

Institutional Flows: How Much Buying Pressure?

Passive index funds are estimated to account for roughly 15–20% of daily market activity. When new names join the S&P, ETFs like SPY, IVV, and VOO must add them in proportion to their index weightings.

• For Robinhood, with a market cap hovering around ~$20 billion, passive funds may need to buy several hundred million dollars’ worth of shares.

• For AppLovin, with a market cap north of ~$50 billion after its historic run, the flows could be even larger.

This forced demand often results in temporary price spikes, but academic studies show these gains tend to normalize within six months as fundamentals take over.

Valuation Check: Are They Worth the Premium?

• Robinhood (HOOD): After its rally, the stock trades at a forward P/E above 40, pricing in strong growth. But earnings remain tied to volatile trading activity, raising questions about whether such multiples are sustainable. Price-to-sales also looks rich at ~9x, compared to traditional brokers like Schwab at ~4x.

• AppLovin (APP): Despite its enormous run, the company trades at ~30x forward earnings, which is not unreasonable for a high-margin, secular growth play in adtech. Its EBITDA margins north of 40% give it more breathing room, though competition from Meta, Google, and Unity remains a risk.

From a pure valuation standpoint, AppLovin looks better positioned for sustainable compounding, while Robinhood appears stretched.

Investor Psychology: Meme Stock DNA vs. Enterprise Growth

Robinhood will forever carry the stigma and allure of the meme stock era. That association can work both ways: in bull markets, retail investors rush back; in downturns, they retreat en masse. Its narrative-driven nature makes it a volatile holding.

AppLovin, by contrast, appeals more to institutions. It’s a story of execution, margin expansion, and technology scaling—less flashy, but arguably more durable. This contrast is why analysts generally prefer AppLovin for long-term allocations.

Long-Term Outlook: Signal or Noise?

For long-term investors, index inclusion is neither a buy nor a sell signal in itself. What matters is whether these companies can justify their valuations and continue to expand earnings.

• Robinhood: Needs to diversify revenue further, stabilize its earnings base, and prove it can thrive outside of speculative booms.

• AppLovin: Must maintain its technology edge while navigating competition from tech giants. Its growth runway remains large, but slowing momentum in 2025 suggests a maturation curve ahead.

Verdict: Caution Over Celebration

• Robinhood (HOOD): After more than doubling this year, Robinhood looks priced for perfection. Its cyclical exposure makes it risky at current levels. For new investors, a wait-and-see approach may be prudent, with better entry opportunities likely after post-inclusion volatility.

• AppLovin (APP): Despite massive multi-year gains, its secular positioning in adtech gives it greater staying power. Inclusion could draw in more institutional buyers, but investors should still watch valuations closely.

Entry Zone:

• Robinhood: Safer below the mid-$20s, after the ETF buying frenzy passes.

• AppLovin: More compelling in the low-to-mid $80s, especially if 2025’s growth slowdown provides a dip.

Key Takeaways for Investors

1. S&P 500 inclusion boosts liquidity but not fundamentals. Investors must separate prestige from profitability.

2. Robinhood is momentum-driven and cyclical, making it vulnerable to trading slowdowns.

3. AppLovin has secular growth tailwinds, positioning it more like a core tech growth story than a speculative trade.

4. ETF inflows create short-term buying pressure, but history suggests these effects fade within months.

5. Patience pays: Long-term allocations should wait for valuations to cool, rather than chase headlines.

👉 In short: Robinhood’s inclusion feels like a speculative victory lap, while AppLovin’s looks more like a sustainable graduation. Both will enjoy their moment in the spotlight, but only one seems built for the long haul.