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On Tuesday, Truist Securities revised its price target for Rapid7 (NASDAQ:RPD) shares, reducing it to $28 from the previous $35, while continuing to recommend a Hold position. According to InvestingPro data, Rapid7 currently generates $849 million in revenue with a market capitalization of $1.7 billion. The adjustment follows Rapid7’s first-quarter results for the fiscal year 2025, which presented a mixed financial picture. The company’s Annual Recurring Revenue (ARR) fell short of market expectations, although its revenue surpassed forecasts, maintaining a healthy gross profit margin of 71%. This performance was attributed to the robustness of its Detection and Response (D&R) segment, which was somewhat undermined by weaker standalone Vulnerability Management (VM) sales and deferred deals worth over one million dollars in the D&R sector.
Rapid7’s management acknowledged encountering escalating macroeconomic challenges, especially within the United States midmarket segment. Despite recent headwinds, InvestingPro analysis shows the stock has demonstrated resilience with an impressive 11% return over the past week. Consequently, the company has revised its fiscal year 2025 guidance downward for ARR, revenue, and Free Cash Flow (FCF). Despite these setbacks, management remains optimistic about the potential for growth reacceleration, banking on the Managed Detection and Response (MDR) service and the newly introduced Exposure Command Solution. InvestingPro subscribers can access 12 additional key insights about Rapid7’s financial health and growth prospects.
Nevertheless, with the VM business experiencing strain and additional macroeconomic obstacles emerging, Truist Securities opted to maintain a cautious stance. The firm’s analyst noted that while there are opportunities for growth, with InvestingPro data showing positive net income expectations for this year, the current pressures on the business warrant a conservative outlook. The Hold rating reflects this position, indicating that the firm advises investors not to buy or sell Rapid7 stock at this time but to maintain their current holdings until clearer signs of business improvement emerge. The stock currently trades at a P/E ratio of 66x, suggesting premium valuation levels compared to peers.
In other recent news, Rapid7 reported first-quarter earnings that exceeded analyst expectations, with adjusted earnings per share at $0.43, surpassing the consensus forecast of $0.34. The company also reported a 3% year-over-year revenue increase to $210.25 million, beating projections of $208.24 million. However, Rapid7’s guidance for the remainder of the year did not meet investor expectations, forecasting second-quarter revenue between $211 million and $213 million, which represents a modest 1-2% growth. For the full year 2025, the company anticipates revenue of $853 million to $863 million, indicating similar growth rates.
Piper Sandler recently adjusted its outlook on Rapid7, reducing the stock price target from $35.00 to $30.00 while maintaining a Neutral rating. This decision was influenced by a sequential decline in the company’s Annual Recurring Revenue (ARR), which fell short by $4 million. Despite these challenges, Rapid7’s detection and response business showed mid-teens growth and remains a significant part of its operations. The company has also introduced new threat detection and response capabilities and plans to open a global capacity center in India. Rapid7 remains committed to "operational discipline," with a forecasted free cash flow of $125 million to $135 million for 2025.
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