By Senad Karaahmetovic
Rapid7 (NASDAQ:RPD) shares fell 18% on Thursday after the company offered soft Q4 guidance and slashed its full-year sales forecast.
Rapid7 reported an EPS of $0.14 on revenue of $176 million, which compares to the consensus that called for an EPS of $0.05 on sales of $176.08 million.
For this quarter, the midpoint of the company’s forecast is calling for an adjusted EPS of $0.185 on revenue of $180 million, missing the estimate that called for an EPS of $0.21 on revenue of $186.9 million.
The full-year revenue forecast is now lowered to a range of $680-682 million, down from the prior $686-690 million range. The adjusted EPS is now seen between $0.17 and $0.20, up from the prior range of $0.08-0.15 range earlier. Analysts were expecting full-year guidance of EPS of $0.10 on sales of $688 million.
Mizuho and Truist analysts slashed their rating on RPD stock, just two weeks after Needham & Company downgraded shares to Hold from Buy.
Truist analysts said Rapid7 is now a “show-me story” after the Q3 earnings report. The analysts cut the rating to Hold from Buy and slashed the price target by 50% to $40 per share.
“While macro headwinds were expected, results were also impacted due to the transition in the go-to market motion which could take several quarters to rectify. Considering we have little visibility or proof that execution issues will be alleviated anytime soon, we cannot recommend buying the shares at current levels. While we rarely downgrade “on the news”, the lack of visibility raises risks that outweigh the potential upside to numbers. Current valuation may be compelling, however, the risk of further negative estimate revision is high,” the Truist analysts said in a client note.
Mizuho analysts downgraded to Neutral from Buy with a $45 per share price target (down from $70). They described Q3 as “very mixed.”
“On the positive side, we believe RPD remains generally well positioned in the SecOps market, and valuation is depressed. However, we expect these GTM challenges could persist for several quarters, which in our view could make it quite challenging for RPD to outperform,” the Mizuho analysts noted.