Rapid7 falls as Needham downgrades, citing increased competition and weakening economy

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Rapid7 (NASDAQ:RPD) shares fell on Friday as investment firm Needham downgraded the cybersecurity software company, citing increased competition and concerns about the global economy.

Needham analyst Alex Henderson downgraded his rating to not buy, noting that companies like CrowdStrike (CRWD) and Palo Alto Networks (PANW) offer “richer and more extensive functionality”, while others, like Tenable (TENB) and Qualys (QLYS) also appear to be gaining momentum.

Shares of Rapid7 (RPD) fell nearly 5% to $43.10 in premarket trading.

In a separate note, Henderson upgraded Qualys (QLYS), noting that it appears to be “improving and strengthening its sales capability.”

Henderson also noted that broader macroeconomic conditions represent “additional pressures” in areas such as the trading market and middle market. The analyst added that although Rapid7 (RPD) has “low” international exposure at just 25% of revenue, it has accounted for between 40% and 50% of its growth.

“We believe that economic pressures and tough competition have created a difficult stage before [full-year 2023]”, explained Henderson, adding that the second half of this year will also be ” difficult on a number of measures “.

In late September, BTIG launched a hedge on Rapid7 (RPD), noting that its valuation is “compelling” but lacks catalysts that could move the stock.

Analysts are largely positive on Rapid7 (RPD). He has a TO BUY note from the authors of Seeking Alpha, while Wall Street analysts also give it a TO BUY. Conversely, Seeking Alpha’s quantitative system, which consistently beats the market, assigns RPD a HOLD.

Martin E. Berry