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On Monday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Rapid7 (NASDAQ:RPD) shares, reducing the price target from $42.00 to $39.00 while maintaining a Neutral rating. The move followed Rapid7’s latest quarterly report, which showed a year-over-year increase in total Annual Recurring Revenue (ARR) of 4%, a figure that met the modest expectations of Wall Street analysts. According to InvestingPro data, the stock appears undervalued compared to its Fair Value, with analyst targets ranging from $35 to $52.
Rapid7’s management provided a formal ARR growth projection for 2025, estimating an increase of 4%-6% year-over-year, aligning with preliminary guidance and analyst projections for mid-single-digit growth. Despite this, the company’s guidance for full-year revenue, non-GAAP EPS, and Free Cash Flow (FCF) fell short of expectations, coming in significantly below what analysts had anticipated. The company maintains a strong gross profit margin of 71% and has achieved revenue growth of 10% over the last twelve months.
The firm acknowledged Rapid7’s reasonable position within the Security Operations (SecOps) market and noted the stock’s relatively low valuation. The revised product offering, Command Platform, was also highlighted as a potential catalyst for improved upselling activity in the future.
However, concerns were raised regarding Rapid7’s recent operational challenges. Analysts at Mizuho expressed skepticism about the company’s ability to significantly boost ARR growth in the near term due to these issues. The updated price target reflects these concerns and the less than favorable earnings guidance provided by Rapid7’s management.
In other recent news, cybersecurity firm Rapid7 reported mixed Q4 results, with revenue surpassing analyst estimates at $216.26 million, a 5% YoY growth, but adjusted earnings per share slightly missing the forecast at $0.48. Despite meeting low expectations with its annual recurring revenue (ARR), the firm reported double quarter-over-quarter growth in new net ARR to $17 million. However, Rapid7’s guidance for Q1 2025 and full-year 2025 fell short of Wall Street’s estimates, leading to lowered price targets by Citi and Jefferies, though both firms maintained a Buy rating on the stock.
Citi analysts revised their outlook on Rapid7, lowering the price target to $44.00 from the previous $46.00, citing concerns over the company’s decision to increase research and development investments. The firm’s forecast for fiscal year 2025 suggests modest mid-single-digit percentage year-over-year growth in ARR, considered acceptable under current conditions.
Similarly, Jefferies adjusted its outlook on Rapid7, reducing the price target from $50.00 to $45.00. The firm noted a shortfall in the 2025 revenue projection due to a shift away from professional services and increased investments in Managed Detection and Response (MDR) and Exposure Management initiatives.
These are recent developments that reflect Rapid7’s strategic shifts and financial outlook. Despite the challenges, both Citi and Jefferies see the current valuation as an opportunity, given the stock’s low price and the potential for future growth.
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