Rapid7 (RPD) AI Stock Analysis

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Rapid7

(NASDAQ:RPD)

64Neutral

Rapid7's overall score is driven by strong financial performance, especially in revenue growth and profitability improvements, albeit offset by high leverage. Technical indicators show negative momentum, and the stock appears overvalued. The earnings call provides a balanced view with both strengths and challenges, while recent corporate events are positive but have minor impact.

Positive Factors

Detection and Response Business

Detection and Response business, which now accounts for more than half of the ARR balance, sustained 'mid-teens' growth.

International Growth

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

Negative Factors

Competitive Pressures

Customer count has declined, and the company has faced increased competitive pressures from other vendors.

Customer Base Reluctance

A largely mid-market focused customer base proved reluctant to increase their spending in risk management.

Spending Environment

The increasing uncertainty in the spending environment came at a tough time for Rapid7.

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

Market Cap

$1.72B

Dividend YieldN/A

Average Volume (3M)980.19K

Price to Earnings (P/E)67.5

Beta (1Y)1.22

Revenue Growth6.19%

EPS GrowthN/A

CountryUS

Employees2,413

SectorTechnology

Sector Strength69

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)0.49

Shares Outstanding64,239,870

10 Day Avg. Volume905,415

30 Day Avg. Volume980,187

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 Cap1.34

Enterprise Value/Revenue0.70

Enterprise Value/Gross Profit3.91

Enterprise Value/Ebitda9.85

Forecast

1Y Price Target

$29.73

Price Target Upside21.05% Upside

Rating ConsensusHold

Number of Analyst Covering18

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 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 Price24.56

Price Trends

50DMA

25.82

Negative

100DMA

31.62

Negative

200DMA

35.16

Negative

Market Momentum

MACD

-0.15

Negative

RSI

48.33

Neutral

STOCH

66.24

Neutral

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 24.56 is above the 20-day moving average (MA) of 23.90, below the 50-day MA of 25.82, and below the 200-day MA of 35.16, indicating a neutral trend. The MACD of -0.15 indicates Negative momentum. The RSI at 48.33 is Neutral, neither overbought nor oversold. The STOCH value of 66.24 is Neutral, 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 (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
QLYS	78 Outperform	$4.96B	27.89	40.23%	―	9.58%	12.41%
CRWD	76 Outperform	$106.96B	721.64	-0.69%	―	29.39%	-119.62%
RPD	64 Neutral	$1.72B	67.46	164.75%	―	6.19%	―
VRNS	64 Neutral	$5.13B	―	-22.21%	―	13.34%	13.71%
Sector *	60 Neutral	$11.39B	10.52	-6.21%	2.95%	7.68%	-11.12%
TENB	60 Neutral	$4.09B	―	-12.09%	―	11.79%	35.35%
SAIL	46 Neutral	$11.04B	―	-11.15%	―	23.16%	-9.81%

* Technology Sector Average

Performance Comparison

RPD

Rapid7

24.56

-13.55

-35.55%

QLYS

Qualys

136.75

-12.98

-8.67%

VRNS

Varonis Systems

45.88

2.09

4.77%

TENB

Tenable Holdings

33.49

-11.25

-25.15%

CRWD

CrowdStrike Holdings

440.20

110.65

33.58%

SAIL

SailPoint, Inc.

19.58

-4.97

-20.24%

Rapid7 Earnings Call Summary

Earnings Call Date:May 12, 2025

(Q1-2025)

% Change Since: -8.15%|

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.