RPD · Rapid7
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $17.93
Note written ·
Price against the kill line
19.6% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $17.93, on record since 11 November 2026. The shares are up 16.5% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $17.93, the 26 October 2026 close near the October peak, would show the shares leading the S&P 500. Fourth-quarter 2026 ARR above the roughly $812 million guide, plus a 2027 outlook for ARR growth, would also prove the call wrong.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 4 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 212
- Revenue, change on a year (%)
- −2.5
- Gross margin (%)
- 69.6
- Operating margin (%)
- 4.2
- Free cash flow, four quarters ($M)
- 140
- Net cash, cash less debt ($M)
- −164
- Price to earnings (×)
- 71.3
- Enterprise value to sales (×)
- 1.4
All filed numbers
What Rapid7 reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 212 | −2.5 | 69.6 | 4.2 |
| first filed | 211 | −1.5 | 68.9 | 1.4 |
| first filed | 210 | −0.3 | 69.1 | −0.3 |
| first filed | 217 | +0.5 | 68.9 | 1.0 |
| first filed | 218 | +1.5 | 70.2 | 2.7 |
| first filed | 214 | +3.0 | 70.6 | 1.6 |
| Pre-tax income ($M) | 6.6 |
| Net income ($M) four quarters: 13.8 | 3.5 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +7.7 |
| Operating cash flow ($M) | 145 |
| Capital spending ($M) | 4.6 |
| Free cash flow ($M) | 140 |
| Cash and short-term investments ($M) | 732 |
| Debt ($M) convertible debt | 895 |
| Net cash, cash less debt ($M) | −164 |
| Deferred revenue ($M) −4.3% on a year | 432 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | Not reported |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 221 |
| Market value ($M) | 988 |
| Enterprise value, market value plus net debt ($M) | 1,151 |
| Enterprise value to sales (×) | 1.4 |
| Enterprise value to operating income (×) | 84.1 |
| Price to earnings (×) | 71.3 |
| Price to book value (×) | 4.5 |
| Free-cash-flow yield (%) | 14.2 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 11.1% of shares outstanding sold short, 5.0 days of average trading to cover, −0.5% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $3.9M | $42K |
The thesis
Rapid7's shares look more likely to lag the S&P 500 over the next three months. Cost cuts produced a large third-quarter profit beat on 4 November 2026, but the company guides recurring revenue lower again for the fourth quarter. The February 2027 report, with Rapid7's first 2027 outlook, settles whether the business has stopped shrinking.
The quarter was better than forecast. The company's 8-K shows annualized recurring revenue (ARR) of $819.7 million, down 2.2% year over year and above the roughly $812 million Rapid7 had forecast. Revenue was $212.4 million, down 2.5%. Non-GAAP operating income was $46.2 million against guidance of $34–36 million. Rapid7 raised its full-year 2026 adjusted earnings per share (EPS) guidance to $1.94–1.96 from $1.78–1.83.
The rating is Low because the beat came from costs while the guide still points down. Rapid7 expects fourth-quarter ARR of about $812 million, a 3% year-over-year decline, and revenue of $208–210 million, down 3% to 4%. CEO Wael Mohamed called the quarter "one quarter of stability" and "just a start." The market has already priced the margin gain: the shares closed at $14.78 on 11 November 2026, below the $15.04 close on 4 November 2026 before the report, and inside the $14–20 range of the eight price targets analysts raised on 5 November 2026 and 6 November 2026.
Bullish and bearish views on Rapid7, Inc.
The bull case on Rapid7, Inc. (RPD), in brief: profit is running ahead of plan. The bear case: recurring revenue keeps falling.
Bull case
- Profit is running ahead of plan. Third-quarter non-GAAP operating income of $46.2 million beat the $34–36 million guide, and adjusted EPS of $0.60 beat the $0.46 consensus estimate, per Benzinga on 4 November 2026. On the call, Mohamed said Rapid7 still expects to exit 2026 at about a 20% non-GAAP operating margin.
- ARR beat its own forecast. ARR of $819.7 million at 30 September 2026 came in about $8 million above the roughly $812 million the company guided on 10 August 2026. Chief Financial Officer Rafe Brown said on the 4 November 2026 call that core ARR should be roughly flat in the fourth quarter.
- Detection and response is growing. Brown said detection and response is over 55% of total ARR and grew about 5% year over year in both the second and third quarters of 2026.
- The debt maturity is covered. Rapid7 held $731.6 million of cash and short-term investments on 30 September 2026, per its 8-K. Management said on 4 November 2026 that cash on hand will retire the $600 million of convertible notes due in March 2027, with a $200 million credit facility undrawn.
- Two analysts now sit above the price. Piper Sandler raised its target to $20 and UBS to $19 on 5 November 2026 and 6 November 2026, both keeping Neutral ratings, per Benzinga.
Bear case
- Recurring revenue keeps falling. The fourth-quarter guide of about $812 million in ARR is roughly $8 million below the third-quarter level and 3% lower year over year, per the 4 November 2026 release. Brown attributed the drop to continued declines in non-core products.
- Exposure management is still shrinking. Brown said exposure management ARR fell about 6% year over year in the third quarter of 2026. Mohamed said that business "is still not where it needs to be."
- Revenue declines are deepening. Third-quarter revenue fell to $212.40 million from $217.96 million a year earlier, per the 10-Q. The fourth-quarter guide implies a 3% to 4% decline.
- Analysts raised targets without upgrading. All eight firms that moved targets on 5 November 2026 and 6 November 2026 kept Neutral, Hold, Sector Perform or Underweight ratings, per Benzinga. Barclays stayed Underweight with a $14 target, and Scotiabank's target is $14.50.
- The 2027 outlook is unknown. Brown said on 4 November 2026 that Rapid7 will give no 2027 guidance until its next report. Interest income on the cash used to repay the March 2027 notes will also disappear.
Price setup
The shares closed at $14.78 on 11 November 2026. That is 20.4% below the 52-week intraday high of $18.56, set on 28 October 2026 during the October software rally. The 50-day moving average is $13.27 and the 200-day moving average is $9.54, both below the last close. The 52-week closing low was $5.05 on 9 April 2026.
The shares rose 7.3% over three months from a $13.78 close on 13 August 2026. The report changed little: the shares closed at $15.04 on 4 November 2026, $15.44 on 5 November 2026 and $14.78 on 11 November 2026. The gain since August came in the October rally, before the report, and the beat-and-raise has not extended it.
SEC Form 4 filings from August to November 2026 show no open-market insider purchases or sales. On 6 November 2026, Executive Chairman Corey Thomas exercised 134,000 options at $12.47, with 123,580 shares withheld at $14.68 to cover the exercise and tax.
Catalysts ahead
- ~10 February 2027 (est.): Rapid7 Q4 2026 report, with the company's first 2027 guidance. Tests Q4 ARR against the roughly $812 million guide and non-GAAP operating income against $40–42 million. The first 2027 outlook shows whether ARR is expected to grow or keep shrinking.
- ~15 March 2027 (est.): Maturity of Rapid7's $600 million convertible notes due March 2027. Rapid7 plans to repay from cash on hand. That would remove the refinancing question, cut cash to about $130 million plus later free cash flow, and end the interest income on that cash.
What would change the view
A daily close above $17.93, the 26 October 2026 close near the October peak, would show the shares leading the S&P 500. Fourth-quarter 2026 ARR above the roughly $812 million guide, plus a 2027 outlook for ARR growth, would also prove the call wrong.
What it trades with
Rapid7 trades with the beaten-down software group. In late October, it rose as buyers rotated out of AI infrastructure names and into software. A rotation back into semiconductors would likely pull it down alongside CrowdStrike and Okta, with no company news needed.
Tenable is the closest peer in vulnerability management. It reported third-quarter 2026 revenue of $276.4 million on 28 October 2026, up 9.5% year over year, and raised its full-year guidance. Rapid7's exposure management ARR fell about 6% over the same period. That gap points to share loss in the category, so a strong Tenable quarter has not reliably lifted Rapid7.
The evidence, claim by claim (8)
- Rapid7 reported Q3 2026 ARR of $819.7 million, down 2.2% year over year, and revenue of $212.4 million, down 2.5%. Rapid7 Q3 2026 results, Form 8-K Exhibit 99.1 (sec.gov) · as of
- Q3 2026 non-GAAP operating income was $46.2 million against guidance of $34–36 million; non-GAAP EPS was $0.60 against a $0.46 consensus estimate. Rapid7 Q3 2026 Form 8-K; Benzinga 4 November 2026 · as of
- Rapid7 guided Q4 2026 ARR to about $812 million (down 3% year over year), revenue to $208–210 million and non-GAAP operating income to $40–42 million. Rapid7 Q3 2026 results, Form 8-K Exhibit 99.1 (sec.gov) · as of
- Rapid7 raised full-year 2026 guidance to revenue of $841–843 million (from $837–841 million) and adjusted EPS of $1.94–1.96 (from $1.78–1.83), with free cash flow of about $130 million. Rapid7 Q3 2026 Form 8-K; Benzinga 4 November 2026 · as of
- Detection and response is over 55% of ARR and grew about 5% year over year; exposure management ARR fell about 6%. Rapid7 Q3 2026 earnings call (CFO Rafe Brown) · as of
- Analysts raised targets after Q3 while keeping their ratings: Piper Sandler $20, UBS $19, Citi $16, RBC $16, Susquehanna $16, Truist $15, Scotiabank $14.50, Barclays $14 (Underweight). Benzinga analyst-action reports, 5 November 2026 and 6 November 2026 · as of
- Executive Chairman Corey Thomas exercised 134,000 options at $12.47, with 123,580 shares withheld at $14.68 to cover the exercise and tax. SEC Form 4 filed 9 November 2026 · as of
- Rapid7 held $731.6 million in cash and short-term investments against $600 million of convertible notes due March 2027, and has a $200 million undrawn credit facility. Rapid7 Q3 2026 Form 8-K; Q3 2026 earnings call · as of
Sources
- Rapid7, Inc. - Form 8-K - FY2026 · sec.gov
- Rapid7 (RPD) Q3 2026 Earnings Call Transcript · webull.com
- Rapid7, Inc. - Form 8-K - FY2026 · sec.gov
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