Results: Rapid7, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts

Investors in Rapid7, Inc. (NASDAQ:RPD) had a good week, as its shares rose 2.9% to close at US$36.77 following the release of its quarterly results. It looks like a credible result overall - although revenues of US$208m were what the analysts expected, Rapid7 surprised by delivering a (statutory) profit of US$0.11 per share, an impressive 68% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Rapid7

Taking into account the latest results, the consensus forecast from Rapid7's 23 analysts is for revenues of US$835.4m in 2024. This reflects an okay 2.2% improvement in revenue compared to the last 12 months. Rapid7 is also expected to turn profitable, with statutory earnings of US$0.37 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$835.2m and earnings per share (EPS) of US$0.39 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target fell 7.6% to US$44.68, with the analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Rapid7, with the most bullish analyst valuing it at US$59.00 and the most bearish at US$32.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Rapid7's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.5% growth on an annualised basis. This is compared to a historical growth rate of 21% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it seems obvious that Rapid7 is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Rapid7 going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 3 warning signs for Rapid7 (of which 1 doesn't sit too well with us!) you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.