Rapid7 stock target cut to $29 by DA Davidson amid JANA agreement

On Tuesday, DA Davidson analyst Rudy Kessinger adjusted Rapid7’s (NASDAQ:RPD) price target to $29.00, a decrease from the previous $35.00, while maintaining a Neutral rating on the stock. The revision follows Rapid7’s announcement of a cooperation agreement with JANA Partners, an activist investor that acquired a stake in the company in June 2024 and, as of recent filings, holds approximately 5.8% of Rapid7’s shares outstanding. According to InvestingPro data, the stock has experienced a significant decline, with a -38.27% return over the past year, though current trading levels align with analysts’ Fair Value estimates.

The agreement between Rapid7 and JANA Partners will result in the expansion of the Board of Directors (BOD) from eight to eleven members. This expansion will include nominees agreed upon by both parties and one individual specifically designated by JANA Partners. Additionally, the pact sets a maximum limit on JANA’s ownership interest in Rapid7 at 14.9%. Despite recent challenges, InvestingPro data shows the company maintains strong fundamentals with a 70.26% gross profit margin and positive free cash flow yield of 9%.

Kessinger noted that the influence of an external entity like JANA Partners could potentially be advantageous for Rapid7’s short-term performance. However, the analyst also expressed skepticism about the possibility of a sale of the company at the current market prices, citing the low single-digit (LSD) growth outlook as a reason for this assessment. Recent InvestingPro data reveals revenue growth of 8.53% in the last twelve months, with analyst targets ranging from $29 to $45 per share. For deeper insights into Rapid7’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

The cooperation agreement with JANA Partners is a strategic move that may influence Rapid7’s operations and governance. The expanded BOD could lead to new perspectives and strategies that might impact the company’s future direction and performance.

In summary, while DA Davidson sees potential benefits from the recent developments, they remain cautious about Rapid7’s growth prospects and have thus lowered their price target on the company’s stock. The Neutral rating suggests a wait-and-see approach, as market observers watch how the cooperation with JANA Partners unfolds and what effects it may have on Rapid7’s business trajectory.

In other recent news, Rapid7 has announced a cooperation agreement with JANA Partners, resulting in the appointment of three new board members, expanding the board to 11 members. This strategic move aims to enhance operational efficiencies and potentially explore sale options. Wolfe Research maintained an Outperform rating with a $31 price target, reflecting confidence in the company’s governance changes. Meanwhile, DA Davidson has adjusted its price target for Rapid7 to $35, down from $39, while maintaining a Neutral rating, following the company’s mixed quarterly financial results. Rapid7’s annual recurring revenue (ARR) increased by 4% year-over-year, although this was below consensus estimates, and the company provided guidance for a 4-6% ARR growth in 2025.

Mizuho (NYSE:MFG) Securities also revised its price target to $39 from $42, citing operational challenges and a less favorable earnings outlook. Despite this, they recognized Rapid7’s position in the Security Operations market and potential for future upselling activity. Citi analysts lowered their price target to $44 from $46 but maintained a Buy rating, noting stabilization in Rapid7’s performance and potential benefits from activist investor involvement. The company reported double quarter-over-quarter growth in new net ARR, alongside better-than-expected operating and free cash flow margins. However, concerns were raised about increased research and development investments and the potential impact on financial optics.

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