What Happened?
Shares of online legal service provider LegalZoom (NASDAQ: LZ) jumped 5.1% in the afternoon session after S&P Dow Jones Indices announced the company will be added to the S&P SmallCap 600 index.
This inclusion is a notable development for the online legal technology company. When a stock is added to a major index, investment funds that track that index are typically required to buy the company's shares to align their holdings. This action often created demand for the stock from institutional buyers. LegalZoom was set to replace Elme Communities, which was removed from the index due to ongoing liquidation activities. The changes were scheduled to take place before the start of trading on February 2, 2026.
After the initial pop the shares cooled down to $9.30, up 4.7% from previous close.
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What Is The Market Telling Us
LegalZoom’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock gained 42.4% on the news that it received a significant upgrade from Bank of America and posted strong second-quarter financial results that topped Wall Street's expectations.
Bank of America raised its rating on LegalZoom to Buy from Underperform and boosted its price target to $12 from $8, citing the company's successful shift to a subscription-based model and benefits from new AI partnerships. The upgrade followed a strong second-quarter earnings report, where revenue grew 9% year-over-year to $192.5 million, surpassing analyst expectations. This growth was fueled by a 10% increase in subscription revenue. Based on this performance, LegalZoom raised its full-year 2025 revenue growth outlook from a previous 5% to 8%, signaling confidence in its continued momentum.
LegalZoom is down 3.1% since the beginning of the year, and at $9.30 per share, it is trading 16.9% below its 52-week high of $11.18 from August 2025. Investors who bought $1,000 worth of LegalZoom’s shares at the IPO in June 2021 would now be looking at an investment worth $245.57.
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