What Happened:
Shares of cybersecurity software maker Rapid7 (NASDAQ:RPD) fell 8% in the morning session after the company reported fourth-quarter results and provided full-year revenue guidance below expectations, suggesting a slowdown in demand. Billings also missed, adding to the weakness. In addition, the company expects professional services revenue growth to be down modestly in 2024 (compared to the previous year), which is expected to result in a minor headwind to billings. On the other hand, Rapid7 topped analysts' revenue expectations during the quarter, even if just narrowly. Strong free cash flow was also a good sign. Overall, this was a weak quarter for the company, given the underwhelming guidance.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Rapid7? Access our full analysis report here, it's free.
What is the market telling us:
Rapid7's shares are very volatile and over the last year have had 19 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 10 days ago, when the company gained 5.4% on the news that UBS analyst Roger Boyd upgraded the stock's rating from Neutral to Buy and raised its price target from $53 to $70. The new price target represents a potential 20% upside from where shares traded when the upgrade was announced.
Rapid7 is up 3.3% since the beginning of the year, and at $56.88 per share it is trading close to its 52-week high of $59.58 from December 2023. Investors who bought $1,000 worth of Rapid7's shares 5 years ago would now be looking at an investment worth $1,277.
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