Rapid7 (RPD) Stock Forecast & Price Target

Rapid7 demonstrated a positive financial outlook with annual recurring revenue (ARR) growing 4% year-over-year to $840 million, largely driven by its Detection and Response segment, which now exceeds $400 million and is experiencing double-digit growth. Additionally, the company's Exposure Management pipeline has seen over a 20% increase year-over-year, indicating strong demand and potential for future revenue growth. Despite a conservative operating margin forecast for CY25 at approximately 15%, management's planned investments in research and development and sales and marketing, coupled with anticipated FedRAMP High certification, suggest a proactive strategy that could further enhance financial performance.

Rapid7's FY25 revenue guidance of $860-870 million, reflecting a modest 2-3% year-over-year growth, fell short of analysts' expectations, indicating a potential stagnation in revenue growth. Additionally, the company reported a significant decline in net new ARR, decreasing by 42% year-over-year, which raises concerns about customer acquisition and retention amid increased investments in sales and marketing. Moreover, the drop in free cash flow by 12% year-over-year further highlights operational difficulties, with declining margins signaling challenges in maintaining profitability while pursuing new product capabilities.