Last Update 25 Dec 25

Fair value Decreased 1.12%

RPD: Managed Detection And Response Execution Will Support Future Share Recovery Potential

Analysts have modestly reduced their price target on Rapid7 to approximately $20.14 from about $20.37, citing ongoing execution challenges and a slower than expected payoff from recent go to market changes, despite continued product innovation and a focus on the higher growth Managed Detection and Response business.

Analyst Commentary

Analysts remain divided on Rapid7, balancing confidence in the companys strategic focus with growing concerns around execution risk and the pace of growth normalization. Recent rating and target changes reflect a market that is waiting for clearer proof points before assigning a higher valuation multiple.

Bullish Takeaways

Bullish analysts view the sharpened focus on the faster growing Managed Detection and Response business as a positive shift that could eventually support above peer growth and justify a re rating if execution improves.
There is ongoing recognition of Rapid7s product innovation in security operations, which some believe provides a differentiated platform that can sustain long term demand and protect the companys strategic value despite near term volatility.
Supportive analysts see the current pullback in price targets as largely reflecting execution timing rather than structural demand issues, suggesting upside potential if go to market changes begin to translate into more consistent annual recurring revenue performance.

Bearish Takeaways

Bearish analysts highlight persistent execution challenges, noting that these are increasingly overshadowing product strengths and limiting confidence in managements ability to deliver against annual recurring revenue guidance.
The recent downgrade to a more neutral stance and lower price targets in the high teens to around $20 signals reduced conviction in near term upside, with valuation now more closely tracking execution risk rather than innovation potential.
Concerns remain that go to market restructuring will take several quarters to fully materialize, extending the timeline for growth re acceleration and raising the risk of further estimate and target cuts if milestones are missed.
Some see the shift toward Managed Detection and Response as operationally sound but worry that the transition phase could pressure bookings and margins, capping multiple expansion until the new model proves it can scale efficiently.

What's in the News

Appointed seasoned security and SaaS veteran Rafe Brown as incoming Chief Financial Officer, succeeding Tim Adams and signaling a renewed focus on financial discipline and scaling. (Company filing)
Issued fourth quarter and full year 2025 guidance calling for roughly mid single digit GAAP operating loss in Q4 and a swing to modest profitability for the full year, underscoring a push toward sustainable earnings. (Company guidance)
Launched a strategic partnership with HITRUST that integrates Rapid7 Surface Command with the HITRUST Framework to automate compliance, reduce audit burden, and support continuous assurance for customers. (Company announcement)
Expanded its collaboration with Microsoft through a new MDR for Microsoft solution that unifies detection and response across Defender powered endpoints, cloud, identity, and email, with new capabilities expected in early 2026. (Company announcement)
Rolled out new AI driven risk intelligence in the Rapid7 Command Platform and Curated Intelligence Rules for AWS Network Firewall to automate cloud threat protection and sharpen vulnerability prioritization for security teams. (Product announcements)

Valuation Changes

The fair value estimate has edged down slightly from approximately $20.37 to about $20.14 per share, reflecting modestly lower long-term expectations.
The discount rate has risen slightly from roughly 11.05 percent to about 11.24 percent, indicating a marginally higher required return and risk premium.
Revenue growth has been revised fractionally lower from about 1.83 percent to approximately 1.82 percent, implying essentially unchanged top-line growth assumptions.
Net profit margin remains effectively stable, ticking up only marginally from around 8.27 percent to roughly 8.27 percent based on updated modeling.
The future P/E has decreased slightly from about 26.1x to roughly 25.9x, suggesting a modest reduction in the valuation multiple applied to forward earnings.

Strategic platform offerings and AI-driven automation are positioning Rapid7 for sustained revenue growth and product differentiation in both commercial and federal markets.
Investments in integrated risk solutions and recurring SaaS revenue, coupled with improving sales execution, provide strong potential for margin expansion and long-term earnings visibility.
Revenue growth faces uncertainty due to longer deal cycles, persistent legacy declines, operational scaling challenges, intensifying competition, and sustained margin pressures from ongoing investments.

Catalysts

About Rapid7

Provides cybersecurity software and services under the Rapid7, Nexpose, and Metasploit brand names.What are the underlying business or industry changes driving this perspective?

Rapid7's unified Command platform and MDR-led solutions are increasingly winning larger, strategic consolidation deals as enterprises seek to reduce fragmentation and simplify compliance in complex, highly regulated environments-pointing to an expanding addressable market, higher average revenue per customer, and sustained revenue growth opportunity.
Growing enterprise demand for AI-integrated, automated security operations is playing to Rapid7's strengths, with Agentic AI and proprietary SOC expertise embedded in offerings like Incident Command-supporting product leadership and the potential for future topline and margin expansion as efficiency and differentiation improve.
Strategic investments in exposure management and integration of on-premise and cloud risk solutions are resulting in larger upgrade deals and higher ASPs than initially forecast, though with longer sales cycles; this indicates an underappreciated upsell/cross-sell runway that could drive significant ARR and margin gains once go-to-market execution matures.
A shift toward recurring SaaS subscription revenue, strong international growth (10% YoY) and prudent operating discipline (high gross margins and robust free cash flow) are creating improved visibility on future earnings and potential for net margin expansion as volume and operational scale increase.
Recent FedRAMP authorization opens a substantial new federal market segment for Rapid7, with government demand for end-to-end cybersecurity suites acting as a multi-year growth catalyst likely to impact revenue and ARR starting in fiscal 2026 and beyond.

Rapid7 Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Rapid7's revenue will grow by 3.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.3% today to 7.0% in 3 years time.
Analysts expect earnings to reach $65.7 million (and earnings per share of $1.02) by about September 2028, up from $28.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.1x on those 2028 earnings, down from 47.2x today. This future PE is lower than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to grow by 2.44% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.62%, as per the Simply Wall St company report.

Rapid7 Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Extended deal cycles and a shift towards larger, more strategic deals are increasing revenue timing uncertainty and reducing predictability, which could result in slower or more volatile near-term and long-term revenue growth.
Persistent declines or stagnation in legacy vulnerability management (VM) and smaller-dollar transactional customers, without sufficient growth in new high-value customers, may weigh on overall ARR and hinder future revenue and earnings expansion.
Difficulty operationalizing and scaling the expansion/upsell engine, as highlighted by management's own admission that continuous expansion engine and easier bite-size adoption for customers are lacking, could limit the growth of average revenue per customer (ARPU) and restrict margin/profit improvement.
Intensifying competition from hyperscalers with integrated security platforms, and industry consolidation favoring larger, more comprehensive vendors, poses long-term risks to Rapid7's market share, pricing power, and ultimately revenue and margins.
Elevated investment in R&D, expanded SOC operations (notably in India), and sales go-to-market transformation initiatives could sustain or worsen margin pressures, especially if revenue growth does not accelerate as anticipated, negatively impacting operating income and free cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $24.662 for Rapid7 based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $34.0, and the most bearish reporting a price target of just $16.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $941.1 million, earnings will come to $65.7 million, and it would be trading on a PE ratio of 35.1x, assuming you use a discount rate of 10.6%.
Given the current share price of $20.42, the analyst price target of $24.66 is 17.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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