Last Update 23 Jan 26

RPD: Execution And Competitive Pressures Will Test MDR Centered Turnaround Narrative

Analysts have trimmed their targets on Rapid7, with several firms cutting their price objectives. These include one move to US$15 from US$25 and another to US$25 from US$29, reflecting concerns around execution, competitive pressures, and what they see as more balanced risk and reward at current levels.

Analyst Commentary

Recent research has leaned more cautious on Rapid7, with several Bearish analysts reducing price targets and, in some cases, cutting ratings following the latest earnings and outlook commentary.

Some see execution issues and tougher competition weighing on the near term setup, even as they acknowledge areas of product strength. Others flag the stock's current valuation as less compelling given what they describe as more limited upside to their revised targets.

JPMorgan trimmed its target to US$20 from US$22 after the earnings report and pointed to execution challenges that they see as taking focus away from product progress. Another firm cut its rating to Hold from Buy and moved its target to US$19 from US$22, highlighting slower traction relative to annual recurring revenue goals and the time needed for go to market changes to show results.

Citi turned more cautious as well, shifting to Neutral from Buy and lowering its target to US$15 from US$25. The firm framed the stock's current risk and reward as balanced, citing expectations for low single digit sales growth, what it calls muted earnings upside, and a competitive backdrop that could limit near term acceleration, while also noting activist involvement as a partial offset.

Separately, UBS reduced its target to US$25 from US$29 while maintaining a positive stance on the broader cybersecurity sector and on mid cap platforms. That said, the lower target reflects what the firm sees as weaker sentiment into 2026 and a more selective setup for stock picking across the group.

Bearish Takeaways

Bearish analysts are marking down price targets into a US$15 to US$25 range, which they see as better aligned with execution risks and more modest growth expectations.
Several rating cuts from Buy to Neutral or Hold point to reduced conviction that Rapid7 will outperform, with some viewing the current share price as already reflecting much of the upside to their revised targets.
Commentary around low single digit sales growth, muted earnings upside, and a challenging competitive backdrop suggests that some analysts are cautious on Rapid7's ability to re accelerate growth in the near term.
Concerns around execution, including slower progress against annual recurring revenue goals and the time required for go to market changes to play out, are central to the more guarded stance on valuation and risk.

What's in the News

Rapid7 provided guidance for Q4 2025 with expected revenue of US$214 million to US$216 million and an anticipated GAAP loss from operations of US$10 million to US$5 million, and for full year 2025 with expected revenue of US$856 million to US$858 million and anticipated GAAP net income of US$5 million to US$10 million (company guidance).
The company appointed Rafe Brown as Chief Financial Officer, effective on or about December 1, 2025. Outgoing CFO Tim Adams will remain in an advisory role during a transition period (company announcement).
Rapid7 announced a partnership with ARMO to add full cloud and application runtime security to the Rapid7 Command Platform, aiming to improve cloud runtime visibility and real time threat detection and response across active cloud assets and workloads (client announcement).
Rapid7 and HITRUST entered a partnership that connects Rapid7 Surface Command with the HITRUST assurance framework, with the goal of automating compliance, reducing audit scope, and supporting continuous, evidence based validation of cybersecurity posture (client announcement).
The company expanded its relationship with Microsoft with a new MDR for Microsoft solution that integrates Rapid7 services with Microsoft Defender across endpoints, cloud, identity, and email, with new capabilities expected to be introduced in early 2026 (client announcement).

Valuation Changes

Fair Value: unchanged at US$14.0, indicating no adjustment to the central value estimate.
Discount Rate: risen slightly from 11.40% to 11.79%, implying a marginally higher required return in the model.
Revenue Growth: risen slightly from 1.20% to 1.21%, a very small adjustment to the long term growth assumption.
Net Profit Margin: risen slightly from 9.29% to 9.33%, reflecting a modest tweak to expected profitability.
Future P/E: risen slightly from 16.38x to 16.47x, indicating a minor change in the valuation multiple used for future earnings.

Intensifying competition from both native cloud providers and industry consolidation threatens customer retention, revenue growth, and the company's long-term market position.
Rising compliance costs and slow cloud transition are constraining operational efficiency and margin expansion despite significant ongoing investments.
AI-driven security offerings, major customer wins, strong sales leadership, new federal market access, and favorable industry trends position Rapid7 for sustainable growth and margin expansion.

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 core markets, such as vulnerability management and SIEM, are experiencing increased downward pricing pressure as AI-driven automation tools rapidly commoditize key security functions, which is likely to constrain revenue growth and exert sustained pressure on gross margins for years to come.
Large cloud providers like AWS, Microsoft, and Google are aggressively expanding their own native security offerings, further threatening Rapid7's ability to retain enterprise customers and acquire new ones, risking both churn and severe deceleration in annual recurring revenue growth.
The intensification of global regulatory and data privacy requirements not only raises compliance complexity but also significantly increases operational costs, making it challenging for Rapid7 to preserve or expand operating margins given its continued need to invest heavily in R&D and compliance.
Rapid7's slower-than-expected transition from legacy products to cloud-native offerings is hampering customer conversion and upgrade velocity, resulting in elongated sales cycles, a decline in transactional upgrade volumes, and a muted ARR expansion trajectory despite efforts to reposition the platform.
Ongoing fragmentation and consolidation in the cybersecurity industry are enabling larger, integrated competitors to exert pricing and market share pressure, which jeopardizes Rapid7's ability to achieve predictable earnings growth and scale its platform profitably in the face of persistently high sales and marketing expenses.

Rapid7 Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on Rapid7 compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming Rapid7's revenue will grow by 2.0% annually over the next 3 years.
The bearish analysts assume that profit margins will shrink from 3.3% today to 3.0% in 3 years time.
The bearish analysts expect earnings to reach $27.4 million (and earnings per share of $0.61) by about September 2028, down from $28.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 54.5x on those 2028 earnings, up from 46.6x today. This future PE is greater than the current PE for the US Software industry at 35.7x.
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 10.55%, as per the Simply Wall St company report.

Rapid7 Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The accelerating adoption and integration of AI-driven capabilities within Rapid7's Command platform and managed detection and response (MDR) offerings gives the company a differentiated edge in a rapidly evolving security landscape, which could drive new customer wins and expansion of annual recurring revenue over the long term.
Large-scale, high-value customer wins-such as multi-year, multi-million dollar agreements that consolidate enterprise security operations onto Rapid7's integrated platform-demonstrate market validation and could enhance both revenue growth and net margins as the company shifts toward higher average selling prices.
Rapid7's significant investments in sales leadership, including the new Chief Commercial Officer with a proven track record of scaling go-to-market motions, are designed to operationalize expansion and cross-sell/upsell initiatives, potentially increasing customer lifetime value and supporting stronger earnings growth.
The recent FedRAMP certification opens up the sizable and stable federal markets to Rapid7 for the first time, offering a substantial new TAM (total addressable market) and providing a long-term growth driver for both top-line revenue and ARR beginning as early as 2026.
Ongoing secular trends-including increased regulatory scrutiny, proliferation of remote and hybrid work, and the shortage of skilled cybersecurity professionals-are fueling demand for unified, automated security platforms, strongly positioning Rapid7's cloud-native, AI-driven solutions for durable revenue and margin expansion despite near-term deal cycle volatility.

Valuation

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

The assumed bearish price target for Rapid7 is $16.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Rapid7's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
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 bearish analysts, you'd need to believe that by 2028, revenues will be $908.9 million, earnings will come to $27.4 million, and it would be trading on a PE ratio of 54.5x, assuming you use a discount rate of 10.6%.
Given the current share price of $20.17, the bearish analyst price target of $16.0 is 26.1% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
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.

Have other thoughts on Rapid7?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystLowTarget 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 AnalystLowTarget 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 AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Falling Margins And Competitive Pressures Will Undercut Long-Term Prospects