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On Thursday, Jefferies made adjustments to its outlook on Rapid7 (NASDAQ:RPD), a cybersecurity company with a market capitalization of $2.3 billion and impressive revenue growth of 10% over the last twelve months, by reducing the price target from $50.00 to $45.00, but reaffirmed a Buy rating on the stock. The adjustment follows Rapid7’s fourth-quarter annual recurring revenue (ARR) growth, which was reported at 4.2% year-over-year, aligning closely with consensus estimates. The company’s guidance for 2025 ARR growth is also within the expected range of 4-6% year-over-year. According to InvestingPro data, the company maintains a strong gross profit margin of 71%.
The analyst from Jefferies highlighted that the 2025 revenue projection fell short of consensus by $17 million, attributed to a $10 million year-over-year decrease in professional services as the company shifts its focus away from these services. Additionally, longer sales cycles have led to a projection that revenue in 2025 will be more heavily weighted towards the second half of the year, thus increasing risk. InvestingPro analysis shows the company is expected to remain profitable this year, with analysts forecasting EPS of $2.70 for 2024.
Rapid7’s non-GAAP operating margin guidance for 2025 is approximately 14.8% at the midpoint, which is significantly lower than the consensus expectation of 19.6%. The discrepancy is due to the company’s planned investments in Managed Detection and Response (MDR) and Exposure Management initiatives.
Despite these challenges, the analyst expressed a continued positive stance on Rapid7, citing the stock’s after-hours valuation of 3.3 times next twelve months’ (NTM) recurring revenue as attractive. The analyst’s commentary suggests that while there are risks and investments that might affect short-term profitability, the potential for growth inflection in the future provides a basis for maintaining the Buy rating.
In other recent news, cybersecurity firm Rapid7 has reported mixed Q4 results, with revenue surpassing analyst estimates but adjusted earnings per share slightly missing the consensus forecast. The company’s fourth-quarter revenue was $216.26 million, exceeding the estimated $212.17 million and marking a 5% YoY growth. However, the adjusted earnings per share were $0.48, a tad below the expected $0.50.
Despite these results, Rapid7’s Q1 and full-year 2025 guidance disappointed investors. The company anticipates Q1 2025 revenue to range between $207-209 million, falling short of Wall Street’s $214.35 million estimate. Furthermore, the full-year 2025 revenue guidance of $860-870 million also didn’t meet the projected $886.25 million.
The company’s annualized recurring revenue (ARR) for the fourth quarter increased by 4% YoY to $839.8 million. Rapid7 also added 201 new customers, raising its total customer count to 11,727. However, the company’s full-year 2025 adjusted EPS guidance of $1.72-$1.85 was below the consensus estimate of $2.33.
These recent developments indicate a focus on growth, customer engagement, and innovation, according to Corey Thomas, Chairman and CEO of Rapid7. As the company moves through 2025, it aims to establish itself as the security operations platform of choice for organizations worldwide.
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