Rapid7 (RPD) AI Stock Analysis

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Rapid7

(NASDAQ:RPD)

Rating:61Neutral

Price Target:

$25.00

▲( 8.65% Upside)

Rapid7 demonstrates strong cash flow and revenue growth, but faces challenges with high leverage and low margins. The stock is technically bearish and overvalued, though strategic board changes may positively impact long-term growth.

Positive Factors

Detection and Response Business

Investors should not discount the double-digit growth in the detection and response business, which still has strong demand.

International Market Growth

Go-to-market investments in international markets yielded 10% growth in business outside of the US.

Product Revenue and EBIT

Rapid7 made steady progress in its Q1 demonstrating solid upside on both product revenue and EBIT.

Negative Factors

ARR Guidance and Growth Outlook

The company significantly widened and lowered its ARR outlook as it experiences greater variability in the range of potential outcomes.

Churn and Budgetary Tightness

The quarter was defined by familiar challenges of ongoing churn in the legacy VM portion of the business as well as ongoing budgetary tightness in the North American mid-market segment.

Vulnerability Management Declines

There is significant risk that vulnerability management declines will worsen throughout the year.

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

Market Cap

$1.50B

Dividend YieldN/A

Average Volume (3M)1.02M

Price to Earnings (P/E)57.4

Beta (1Y)1.10

Revenue Growth6.19%

EPS GrowthN/A

CountryUS

Employees2,413

SectorTechnology

Sector Strength75

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)0.49

Shares Outstanding64,239,296

10 Day Avg. Volume1,153,207

30 Day Avg. Volume1,020,321

Financial Highlights & Ratios

PEG Ratio-1.32

Price to Book (P/B)89.83

Price to Sales (P/S)0.00

P/FCF Ratio10.22

Enterprise Value/Market Cap1.53

Enterprise Value/Revenue0.70

Enterprise Value/Gross Profit3.91

Enterprise Value/Ebitda9.85

Forecast

1Y Price Target

$30.25

Price Target Upside31.46% Upside

Rating ConsensusHold

Number of Analyst Covering19

Rapid7 Business Overview & Revenue Model

Company DescriptionRapid7, Inc. (RPD) is a leading provider of cybersecurity solutions, offering a comprehensive suite of products and services designed to enhance security operations and improve vulnerability management for organizations. The company specializes in providing cloud-native security solutions that empower IT and security professionals to detect and respond to cyber threats effectively. Rapid7's core offerings include its Insight platform, which integrates various tools for vulnerability management, application security, threat detection and response, and automation.

How the Company Makes MoneyRapid7 primarily generates revenue through the sale of its cybersecurity software solutions and services. The company's revenue model is predominantly subscription-based, with customers paying recurring fees for access to its Insight platform and other security tools. Key revenue streams include software licenses, cloud-based subscriptions, and professional services, such as consulting and training. Rapid7 also benefits from strategic partnerships and integrations with other technology providers, which enhance its product offerings and expand its market reach. The company continuously invests in research and development to innovate and maintain its competitive edge in the cybersecurity market.

Rapid7 Key Performance Indicators (KPIs)

Any

Annualized Recurring Revenue

Annualized Recurring Revenue
Measures the predictable revenue generated from subscriptions or contracts, indicating financial stability and the potential for sustained growth.

Chart InsightsRapid7's ARR has shown steady growth, reaching $840 million by the end of 2024, driven by strong performance in detection and response services. Despite challenges in traditional vulnerability management and macroeconomic uncertainties, the company is shifting focus towards integrated solutions and international expansion. With strategic reinvestments planned, including enhancing managed detection and response services, Rapid7 aims for 4% to 6% ARR growth in 2025, targeting $870 million to $890 million. This strategic pivot could position Rapid7 well against market pressures and enhance its competitive edge.

Data provided by:

Main Street Data

Rapid7 Financial Statement Overview

Summary

Rapid7 exhibits strong revenue growth and improving profitability as reflected in the income statement, with significant margin improvements. The cash flow statement indicates enhanced cash generation. However, the balance sheet's high leverage poses a potential risk, which slightly offsets the positive aspects.

Income Statement

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

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

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.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
844.01M	777.71M	685.08M	535.40M	411.49M
	Gross Profit
592.97M	545.97M	470.73M	366.46M	289.97M
	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 Sheet		Cash, Cash Equivalents and Short-Term Investments
521.71M	383.17M	291.45M	223.43M	312.46M
	Total Assets
1.65B	1.51B	1.36B	1.30B	913.12M
	Total Debt
1.02B	1.02B	914.34M	912.56M	463.94M
	Net Debt
683.49M	810.95M	707.05M	747.98M	290.32M
	Total Liabilities
1.63B	1.62B	1.48B	1.42B	841.59M
	Stockholders Equity
17.71M	-118.18M	-120.07M	-126.00M	71.54M
Cash Flow		Free Cash Flow
168.25M	84.03M	40.68M	35.05M	-15.04M
	Operating Cash Flow
171.67M	104.28M	78.20M	53.92M	4.89M
	Investing Cash Flow
-46.52M	-178.75M	-39.99M	-325.38M	-156.29M
	Financing Cash Flow
5.58M	79.60M	7.42M	264.13M	200.93M

Rapid7 Technical Analysis

Technical Analysis Sentiment

Negative

Last Price23.01

Price Trends

50DMA

25.12

Negative

100DMA

30.47

Negative

200DMA

34.67

Negative

Market Momentum

MACD

-0.49

Positive

RSI

41.39

Neutral

STOCH

7.44

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 23.01 is below the 20-day moving average (MA) of 24.07, below the 50-day MA of 25.12, and below the 200-day MA of 34.67, indicating a bearish trend. The MACD of -0.49 indicates Positive momentum. The RSI at 41.39 is Neutral, neither overbought nor oversold. The STOCH value of 7.44 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 (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
QLYS	78 Outperform	$5.02B	27.76	40.23%	―	9.58%	12.41%
CRWD	76 Outperform	$110.15B	721.64	-0.69%	―	29.39%	-119.62%
VRNS	66 Neutral	$5.21B	―	-22.21%	―	13.34%	13.71%
RPD	61 Neutral	$1.50B	57.39	164.75%	―	6.19%	―
Sector *	61 Neutral	$11.41B	10.19	-7.05%	2.95%	7.46%	-10.52%
TENB	60 Neutral	$3.99B	―	-12.09%	―	11.79%	35.35%
SAIL	46 Neutral	$9.90B	―	-11.15%	―	23.16%	-9.81%

* Technology Sector Average

Performance Comparison

RPD

Rapid7

23.01

-14.97

-39.42%

QLYS

Qualys

136.43

-9.82

-6.71%

VRNS

Varonis Systems

46.76

2.21

4.96%

TENB

Tenable Holdings

32.02

-11.11

-25.76%

CRWD

CrowdStrike Holdings

444.07

101.72

29.71%

SAIL

SailPoint, Inc.

17.24

-7.31

-29.78%

Rapid7 Earnings Call Summary

Earnings Call Date:May 12, 2025

(Q1-2025)

% Change Since: -13.95%|

Next Earnings Date:Aug 12, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture for Rapid7. While the company exceeded revenue and operating income expectations, driven by strong growth in the Detection and Response segment and international markets, it faced challenges with ARR growth and the Risk and Exposure Management business. The macroeconomic environment contributed to increased customer caution and extended deal cycles, leading to adjusted guidance for the full year.

Q1-2025 Updates

Positive Updates

Revenue and Operating Income Exceed Expectations

Rapid7 ended the first quarter with revenue and operating income above guidance ranges, achieving $210 million in revenue, a 3% year-over-year growth.

Detection and Response Business Growth

Detection and Response (D&R) continued as the core growth driver with over half of total ARR and mid-teens growth. This segment maintained strong customer demand and expanded its market opportunity.

International Revenue Growth

International revenue grew by 10% year-over-year, representing 25% of total revenue, demonstrating strong demand outside the U.S.

Profitability and Free Cash Flow

Rapid7 demonstrated strong operational discipline with $32 million in operating income and $25 million in free cash flow generation during Q1.

Negative Updates

ARR Growth Below Expectations

ARR ended at $837 million with 4% year-over-year growth, falling short of expectations due to challenges in the Risk and Exposure Management business.

Challenges in Risk and Exposure Management

The Risk and Exposure Management business experienced continued growth deceleration, missing expectations and facing macroeconomic headwinds.

Increased Customer Caution

Customers, particularly in the North American mid-market enterprise segment, demonstrated greater scrutiny and tighter budget control, leading to extended deal cycles.

Adjusted ARR and Revenue Guidance

Full-year ARR guidance was lowered and widened to $850 million to $880 million, growth of 1% to 5%, reflecting a slower start to the year and increased market uncertainty.

Company Guidance

During Rapid7's Q1 2025 earnings call, the company provided financial guidance for the second quarter and full fiscal year 2025. The company reported an ARR of $837 million, a 4% year-over-year increase, despite some challenges. Revenue for the first quarter was $210 million, surpassing expectations, with product revenue growing by 4% to $204 million. Operating income for the quarter was $32 million, and adjusted EBITDA was $39 million. Rapid7 adjusted its full-year ARR guidance to a range of $850 million to $880 million, reflecting 1% to 5% growth, and maintained its operating income outlook of $125 million to $135 million. For Q2, the company expects revenue between $211 million and $213 million, with non-GAAP operating income projected between $30 million and $32 million. The company anticipates non-GAAP net income per share of $1.78 to $1.91 for the full year, based on approximately 76.7 million diluted weighted average shares.

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.