Rapid7 Inc. (RPD)
:RPD

Rapid7 (RPD) AI Stock Analysis

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Rapid7

(NASDAQ:RPD)

61Neutral
Rapid7's overall stock score reflects its strong financial performance with robust revenue growth and improved profitability. The technical analysis indicates a bearish trend, while a high P/E ratio suggests overvaluation. Earnings call highlights resilience in certain segments, but challenges remain in others. The recent corporate event is a positive step towards strategic enhancement.
Positive Factors
Growth in Detection and Response
RPD is shifting resources to its faster-growing segments, such as Detection and Response, which is now over $400MM in ARR and growing double digits.
Pipeline and ARR Growth
Management noted pipeline entering 2025 was better vs a year ago and remains confident in ARR accelerating in 2025/26.
Product Portfolio and Prospects
The company has made strides in improving both its sales structure and platform capabilities that should set the company up well for growth as macro conditions improve.
Negative Factors
Financial Guidance and Profitability
RPD's full year revenue, non-GAAP EPS and FCF guidance was surprisingly disappointing, coming significantly below Street expectations.
Market Competition and Growth Challenges
The traditional VM space is experiencing intense competition and accelerating cloud migrations, which are causing growth in the market to materially slow.
Operating Margin and Income
The CY25 operating margin outlook for approximately 15% was nearly 500 basis points below Street expectations.

Rapid7 (RPD) vs. S&P 500 (SPY)

Rapid7 Business Overview & Revenue Model

Company DescriptionRapid7, Inc. provides cyber security solutions. The company offers a cloud-native insight platform that enables customers to create and manage analytics-driven cyber security risk management programs. Its platform includes InsightIDR, an incident detection and response solution; InsightCloudSec, a solution that integrates posture management, workload protection, infrastructure entitlements management, infrastructure-as-code security, and Kubernetes protection; InsightVM, a vulnerability risk management solution that is designed to provide a way to collect vulnerability data, prioritize risk, and automate remediation; InsightAppSec, which provides application security testing that analyzes web applications for security vulnerabilities; and InsightConnect, a security orchestration and automation response solution that is used by security professionals. The company's other products include DivvyCloud, a cloud security posture management solution; Nexpose, an on-premises version of company's vulnerability risk management solution; AppSpider, an on-premises version of company's application security testing solution; and Metasploit, a penetration testing software solution, as well as professional services. It offers its products through term or perpetual software licenses, cloud-based subscriptions, and managed services. The company serves customers in a range of industries, including technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government, and professional services industries through sales teams, and indirect channel partner relationships, as well as directly in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was incorporated in 2000 and is headquartered in Boston, Massachusetts.
How the Company Makes MoneyRapid7 generates revenue through a combination of subscription services, maintenance and support fees, and professional services. The primary revenue stream comes from its cloud-based subscription offerings, where customers pay for access to the Insight Platform and its suite of security solutions on a subscription basis. This model ensures a steady and recurring revenue stream. Additionally, the company offers maintenance and support services for its products, providing technical assistance and updates, which contribute to its revenue. Professional services, including consulting, implementation, and training, also play a significant role in the company's earnings, as organizations often require expert guidance to effectively deploy and manage Rapid7's solutions. Partnerships with technology vendors and resellers further amplify Rapid7's market reach and revenue potential, as these collaborations help to expand its customer base and enhance the integration of its products into broader IT ecosystems.

Rapid7 Financial Statement Overview

Summary
Rapid7 exhibits strong revenue growth and improving profitability, with significant margin improvements in the income statement and enhanced cash generation in the cash flow statement. However, the high leverage indicated by the balance sheet poses a potential risk.
Income Statement
75
Positive
Rapid7's income statement shows a robust revenue growth trajectory, with a 8.51% increase from 2023 to TTM (Trailing-Twelve-Months) 2024. Gross profit margin stands at 69.59%, indicating strong operational efficiency. The net profit margin improved significantly to 3.46% from a loss position in 2023. EBIT and EBITDA margins are positive, reflecting a turnaround in profitability.
Balance Sheet
60
Neutral
The balance sheet reveals a high debt-to-equity ratio, indicative of financial risk, due to low stockholders' equity and high total debt. However, the return on equity has improved to 164.73% in TTM 2024, showcasing increased profitability on equity. Equity ratio remains low at 1.07%, highlighting potential leverage concerns.
Cash Flow
70
Positive
Cash flow analysis shows a strong free cash flow growth rate of 87.77% from 2023 to TTM 2024, indicating improved cash generation. The operating cash flow to net income ratio of 5.89 signifies strong cash conversion. Free cash flow to net income ratio is also strong at 5.41, reflecting efficient cash management.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
844.01M777.71M685.08M535.40M411.49M
Gross Profit
592.97M545.97M470.73M366.46M289.97M
EBIT
35.03M-80.73M-111.61M-120.06M-74.10M
EBITDA
97.31M-39.14M-70.28M-88.12M-50.09M
Net Income Common Stockholders
25.53M-149.26M-124.72M-146.33M-98.85M
Balance SheetCash, Cash Equivalents and Short-Term Investments
521.71M383.17M291.45M223.43M312.46M
Total Assets
1.65B1.51B1.36B1.30B913.12M
Total Debt
1.02B1.02B914.34M912.56M463.94M
Net Debt
683.49M810.95M707.05M747.98M290.32M
Total Liabilities
1.63B1.62B1.48B1.42B841.59M
Stockholders Equity
17.71M-118.18M-120.07M-126.00M71.54M
Cash FlowFree Cash Flow
168.25M84.03M40.68M35.05M-15.04M
Operating Cash Flow
171.67M104.28M78.20M53.92M4.89M
Investing Cash Flow
-46.52M-178.75M-39.99M-325.38M-156.29M
Financing Cash Flow
5.58M79.60M7.42M264.13M200.93M

Rapid7 Technical Analysis

Technical Analysis Sentiment
Negative
Last Price23.68
Price Trends
50DMA
31.86
Negative
100DMA
36.25
Negative
200DMA
37.30
Negative
Market Momentum
MACD
-1.28
Negative
RSI
33.78
Neutral
STOCH
11.64
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RPD, the sentiment is Negative. The current price of 23.68 is below the 20-day moving average (MA) of 27.86, below the 50-day MA of 31.86, and below the 200-day MA of 37.30, indicating a bearish trend. The MACD of -1.28 indicates Negative momentum. The RSI at 33.78 is Neutral, neither overbought nor oversold. The STOCH value of 11.64 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RPD.

Rapid7 Risk Analysis

Rapid7 disclosed 52 risk factors in its most recent earnings report. Rapid7 reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Rapid7 Peers Comparison

Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$101.68B86.7623.38%13.86%-46.44%
73
Outperform
$4.33B25.4841.09%10.40%14.78%
ZSZS
73
Outperform
$27.03B-1.21%27.77%89.39%
70
Outperform
$65.14B37.48338.74%12.27%54.69%
67
Neutral
$15.16B1,777.39-5.91%33.10%-20.31%
RPRPD
61
Neutral
$1.51B59.65164.75%8.53%
57
Neutral
$18.57B9.42-13.42%2.72%5.01%-23.43%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
RPD
Rapid7
23.68
-25.18
-51.53%
FTNT
Fortinet
84.71
16.32
23.86%
PANW
Palo Alto Networks
153.57
19.28
14.36%
QLYS
Qualys
118.59
-48.07
-28.84%
CYBR
CyberArk Software
306.46
47.19
18.20%
ZS
Zscaler
174.67
-9.04
-4.92%

Rapid7 Earnings Call Summary

Earnings Call Date: Feb 12, 2025 | % Change Since: -35.63% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed sentiment where Rapid7 experienced growth in key areas like detection and response and international revenue, while facing challenges in traditional vulnerability management and macroeconomic uncertainties. Despite exceeding revenue and income expectations, the company is undergoing a strategic shift to address market changes.
Highlights
Revenue and Operating Income Exceed Expectations
Rapid7 ended 2024 with $840 million in ARR, meeting expectations and achieving 4% growth over the prior year. Revenue and operating income exceeded guided ranges, with over $150 million in free cash flow generated for the year.
Detection and Response Business Growth
The detection and response business experienced double-digit growth in 2024, reaching over $400 million in ARR. The average ARR per DNR customer is now approximately $100,000.
Risk and Exposure Management Momentum
The risk and exposure management business showed promising momentum with over 20% year-over-year growth in total risk and exposure management pipeline generation during the fourth quarter.
Cloud Security Milestone
A significant milestone in cloud security adoption was achieved with the release of Exposure Command, validating Rapid7's integrated approach to comprehensive attack surface management.
Strong International Revenue Growth
International revenue grew 14% year-over-year, increasing to 25% of total revenue, while North America grew 3%.
Lowlights
Challenges in Vulnerability Management
The vulnerability management landscape is experiencing secular pressure, with growth deceleration and moderately increased churn in traditional VM markets.
Slower Than Expected Transition to New Products
The transition from traditional vulnerability management to integrated solutions like Exposure Command faced delays, impacting overall growth.
Higher Hosting Costs Impact Margins
Product gross margin was slightly below the prior year due to higher hosting costs.
Macroeconomic Uncertainty Affecting Certain Segments
Segments such as state, local, educational, and healthcare markets face uncertainty and disruption, impacting spending patterns.
Company Guidance
During the Rapid7 fourth quarter 2024 earnings call, the company provided financial guidance for the fiscal year 2025, expecting annual recurring revenue (ARR) growth of 4% to 6%, reaching between $870 million to $890 million by year-end. This projection is primarily driven by the detection and response business, which ended 2024 with over $400 million in ARR and is growing in the mid-teens. Rapid7 also plans to reinvest up to $30 million into strategic growth initiatives, including expanding its managed detection and response (MDR) service capabilities and enhancing its exposure management offerings. For 2025, the company forecasts total revenue of $860 million to $870 million, with an operating income of $125 million to $135 million and free cash flow of approximately $135 million. The first quarter of 2025 is expected to see total revenue of $207 million to $209 million and operating income of $23 million to $25 million.

Rapid7 Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
Rapid7 Expands Board with New Independent Directors
Positive
Mar 24, 2025

On March 21, 2025, Rapid7 entered into a Cooperation Agreement with JANA Partners Management, LP, resulting in the expansion of its Board of Directors from eight to eleven members. This agreement includes the appointment of Wael Mohamed, Michael Burns, and Kevin Galligan as independent directors, with these changes set to enhance Rapid7’s strategic execution and shareholder value. The appointments are part of Rapid7’s efforts to accelerate growth and operational efficiency, positioning the company for sustainable, profitable growth in the cybersecurity industry.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.