Market Overview

Rapid7's Growth Is Already Priced In, Analyst Says In Neutral Initiation

Rapid7's Growth Is Already Priced In, Analyst Says In Neutral Initiation

While security analytics name Rapid7 Inc (NASDAQ: RPD) is positioned for growth over the coming years, it isn't reason enough to be a buyer of the stock, according to D.A. Davidson.

The Analyst

D.A. Davidson's Mark Kelleher initiated coverage of Rapid7's stock with a Neutral rating and 12-18 month price target of $28.

The Thesis

Rapid7 continues to leverage its already strong position in the security and analytics market by expanding into the broader security operations market, Kelleher said in the initiation note.

The expansion will increase Rapid7's total addressable market, and the company is adding IT operations management and automation capabilities through both internal initiatives and the 2017 acquisition of security automation platform Komand, the analyst said. 

The company is transitioning to a cloud delivery model for its security visibility offerings, which not only enhances customer interaction, but leads to improved renewal rates, the analyst said. A shift to a more recurring revenue profile gives investors "significant visibility to Rapid7's earnings model, Kelleher said. 

Despite the fact that Rapid7 is positioning itself for long-term growth, much of the growth is already reflected in the stock's valuation, the analyst said.

The company's higher revenue growth versus its peers coupled with a lack of earnings warrants a 4x multiple — near the sector average — on fiscal 2019 revenue, or a $28 price target, according to D.A. Davidson. 

Price Action

Shares of Rapid7 were up 0.46 percent at $26.25 at the close Wednesday. 

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Stifel Downgrades Secureworks On Gross Margin Doubts

Latest Ratings for RPD

Jan 2021Morgan StanleyMaintainsEqual-Weight
Jan 2021Piper SandlerDowngradesOverweightNeutral
Nov 2020Raymond JamesMaintainsOutperform

View More Analyst Ratings for RPD
View the Latest Analyst Ratings


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