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Rapid7: Comprehensive And Top-Of-Mind Offering

Jun. 05, 2020 6:57 AM ETRapid7, Inc. (RPD)3 Comments
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Tech and Growth


  • Despite the slowdown in 2020, the comprehensive offering will reaccelerate growth to +30%.
  • Metasploit remains a hidden asset that will consistently drive long-term awareness.
  • Given the profitability and cash-flow-positive guidance in Q4 and 2021, Rapid7 is undervalued at ~7x P/S.


We maintain our overweight position in Rapid7 (NASDAQ:RPD). In our most recent coverage about Rapid7 last December, we highlighted the company's strong growth in its VRM (Vulnerability Risk Management) business and its open-source Metasploit project, which will continue to be a long-term hidden asset as Rapid7 navigates the rapidly-changing cloud security industry. In Q1 2020, Rapid7 continued maintaining its solid growth despite the near-term slowdown due to the COVID-19 situation, and it will guide towards profitability and being cash-flows positive beyond Q4 and 2020. In our view, Rapid7 will remain as a top-of-mind choice in the cloud cybersecurity market longer term, due to its strength across all core categories and the continuing global awareness of its offerings driven by the Metasploit project.


We identify two key catalysts that we believe will drive long-term growth for the business:

Rapid7's comprehensive and market-leading cloud cybersecurity offerings remain a unique selling point. While it has been well-known for its insightVM VRM offering, which has received various leadership awards from leading IT solution research firms such as Gartner and Forrester, Rapid7 has also expanded into SIEM & IDR, AppSec, and Automation spaces in recent times. Except for its emerging Automation offering InsightConnect, all Rapid7's offerings, such as InsightIDR, insightAppSec, and recently-acquired DivvyCloud, have gained meaningful tractions and become co-category leaders with those of Splunk (SPLK), Qualys (QLYS), Tenable (TENB), or Micro Focus (OTCMKTS: MCFUF).

(Source: company's Q1 earnings call slide)

Rapid7 is also one of the only few vendors with a strong, comprehensive, and unified go-to-market approach and offerings. In our view, this will increase the mission-criticality of the combined offering and further boost the growth in mid-size and enterprise install base expansion rate and ARR per customer. At present, mid-size and enterprise clients already make up 50% of ARR.

(Source: Q1

This article was written by

Tech and Growth profile picture
Former tech operator, entrepreneur, and venture capitalist with over a decade of experience starting, investing, and building companies in Asia and US. Long-only manager seeking multi-asset technology / growth opportunities driving disruptive innovation globally.

Analyst’s Disclosure: I am/we are long RPD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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