Rapid7 (RPD) Stock Forecast & Price Target

Rapid7 has demonstrated solid performance in its Annual Recurring Revenue (ARR), which grew 4% year-over-year to reach approximately $840 million, with a significant portion attributed to its Detection and Response (D&R) services, now exceeding $400 million and expanding at a double-digit growth rate. The company's operating margin has shown consistent improvement, with the outlook for the upcoming year projected at around 15%, reflecting a significant investment in research and development as well as sales and marketing to fuel future growth. Additionally, an increase in the Exposure Management pipeline by over 20% year-over-year, coupled with expectations of FedRAMP High certification in the coming year, positions Rapid7 for potential upside in a rapidly evolving cybersecurity landscape.

Rapid7 provided FY25 revenue guidance of $860-870 million, which fell short of the consensus estimate of $882 million, reflecting a modest year-over-year growth of only 2-3% compared to expectations of 5%. The company also faced challenges with decreased net new annual recurring revenue (ARR), which declined by 42% year-over-year, despite overall ARR figures aligning with expectations; this decline was attributed to a $10 million reduction in professional services as Rapid7 shifts its focus. Additionally, operating income margins are projected to decline significantly, with a 15% margin expected, indicating over 400 basis points of year-over-year decline, alongside a drop in free cash flow by 12% year-over-year, further highlighting potential financial pressures.