Rapid7: Growth At A Reasonable Price...Even For Cybersecurity Stocks?

• Rapid7 Inc RPD shares are down 8 percent since the start of their trading in July 2015.
• Barclays’ Saket Kalia upgraded the rating on the company from Equal-Weight to Overweight, while maintaining the price target at $28.
• The company is poised to benefit from accelerating growth in the threat exposure management segment, Kalia noted.

Analyst Saket Kalia mentioned that a focus on security data should allow Rapid7 to gain a disproportionate share in the high-growth threat exposure management segment. Increased billings are expected to drive the company’s revenue growth in 2016 and 2017.

Kalia believes that an elevated threat environment has shifted TEM from a “compliance/check-the-box tool to a proactive, high ROI security tool.” This is likely to accelerate Rapid7’s growth to 15-17 percent in FY15 and FY16.

Rich vulnerability data provided by Nexpose, Metasploit, and UserInsight is expected to boost the company’s market share and billings in 3Q and 4Q, and translate into stronger revenue growth, the Barclays report mentioned.

While saying that Rapid7’s current stock valuation is attractive, Kalia wrote that the current levels “offer us that better entry point and represent growth at a reasonable price.”

The analyst expects the company’s revenues to grow a CAGR of at nearly 30 percent through FY17. Rapid7 stock is trading at below the average of the security industry and the risk-reward at current levels appears attractive.