What Happened: Shares of cybersecurity software maker Rapid7 (NASDAQ:RPD) fell 21.2% in the afternoon session after the company reported first quarter earnings results. While revenue and EPS narrowly topped Wall Street's estimates, its full-year revenue guidance fell short, and was lowered. In addition, its free cash flow was down 54.3% from the previous quarter. Overall, this was a subpar quarter for Rapid7.
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? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Rapid7's shares are very volatile and over the last year have had 14 moves greater than 5%. But moves this big are very rare even for Rapid7 and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 8% on the news that 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.
Rapid7 is down 30.9% since the beginning of the year, and at $38 per share it is trading 38.2% below its 52-week high of $61.47 from February 2024. Investors who bought $1,000 worth of Rapid7's shares 5 years ago would now be looking at an investment worth $725.74.
