Rapid7 Earnings: Poor Execution Caps Top-Line Expansion Amid a Tough Macroenvironment

We maintain our $45 per share fair value estimate for no-moat Rapid7 after the firm kicked off fiscal 2024 with a strong set of quarterly results offset by a surprise reduction in the firm’s 2024 top-line outlook. The reduction in the firm’s sales outlook for 2024 was primarily driven by poor execution as Rapid7 failed to gain customer traction for its Cloud Risk Complete offering. While the firm’s outlook calls for a sequential recovery in annual recurring revenue, or ARR, peppered throughout the remainder of the fiscal year, investors were spooked by the guidance cut, resulting in the firm’s shares dropping sharply after hours.