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On Tuesday, Rapid7 shares faced a downgrade by DA Davidson analysts, shifting from a Neutral stance to Underperform. The firm also reduced the price target for Rapid7 (NASDAQ: RPD) to $21.00, a notable decrease from the previous $29.00 target. The revision comes as growth for Rapid7 appears to be decelerating significantly. Despite the downgrade, InvestingPro data shows the stock has gained 11% in the past week, with a current market capitalization of $1.7 billion. The company maintains a GOOD financial health score, suggesting underlying stability despite growth concerns.
DA Davidson expressed concerns over Rapid7’s growth trajectory, highlighting a slowdown towards the lower single-digit range. The possibility of growth turning negative in the foreseeable future was cited as a real risk. This assessment follows Rapid7’s first-quarter Annual Recurring Revenue (ARR), which only saw a year-over-year increase of 4%, falling short of consensus expectations. However, InvestingPro data reveals the company achieved 8.53% revenue growth in the last twelve months, with analysts expecting net income growth this year.
The downgraded outlook was further justified by several key indicators. Rapid7 reported a negative Net New Annual Recurring Revenue (NNARR) of $2.6 million, a quarter-over-quarter decline in customer count, and Contractual Remaining Performance Obligations (CRPOs) that also saw a decrease from the previous quarter. Additionally, year-over-year CRPO growth decelerated to just 3%.
Looking ahead, Rapid7’s guidance for Calendar Year 2025 ARR growth was revised downwards from an initial range of 4-6% year-over-year to a modest 1-5%. The company’s Free Cash Flow (FCF) guidance for the same year was also reduced. DA Davidson analysts pointed out that the revised guidance is based on an assumption of ’moderate stabilization’ in declines of vulnerability management (VM), which suggests that further cuts to the guidance could be likely if this stabilization does not materialize as expected.
The downgrade by DA Davidson reflects significant caution regarding Rapid7’s near-term performance prospects, indicating that the firm anticipates further challenges ahead for the cybersecurity company’s financial outlook. For investors seeking deeper insights, InvestingPro offers 12 additional investment tips and a comprehensive Pro Research Report, providing detailed analysis of Rapid7’s financial health, valuation metrics, and growth prospects among 1,400+ top stocks.
In other recent news, Rapid7 Inc (NASDAQ:RPD). reported its Q1 2025 earnings, revealing a revenue of $210 million, which slightly exceeded the forecast of $208.24 million. This revenue performance represented a 3% year-over-year growth, with product revenue contributing $204 million, marking a 4% increase. The company also reported an operating income of $32 million and a free cash flow of $25 million. Rapid7’s annual recurring revenue (ARR) reached $837 million, showing a 4% year-over-year growth, although it fell short of internal expectations. The company’s strategic focus remains on expanding its Detection & Response offerings and enhancing AI capabilities, despite challenges in the U.S. mid-market spending environment. Rapid7 provided full-year 2025 ARR guidance of $850-$880 million and revenue guidance of $853-$863 million, indicating modest growth expectations. Barclays (LON:BARC) analysts noted delays in deal closures due to the macro environment but acknowledged positive deal activity in April. The company continues to invest in growth areas while navigating competitive pressures in the Vulnerability Management space.
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