Rapid7 ( NASDAQ: RPD ) shares slipped on Friday as investment firm BTIG initiated coverage on the cybersecurity company, noting that its valuation is “compelling” but it has a lack of catalysts that could move the stock.
Analyst Gray Powell started Rapid7 ( RPD ) shares with a neutral rating, noting that Rapid7 is seeing as one of the top two companies in the vulnerability management space and has a number of products in tangential categories such as application security, cloud security and managed detection response that “generally received positive reviews.”
“As a result, we see a healthy market opportunity ahead of RPD over the next few years,” Powell wrote, but added that the growth in the company’s core vulnerability management market is slowing, a big negative as it accounts for roughly half of the company’s revenue.
Rapid7 ( RPD ) shares fell nearly 1% to $46.06 in early trading.
The analyst added that Rapid7 ( RPD ) has a “large and growing” total addressable market of $40B and its typical customer is now paying $62,000 a year, but that could grow to more than $500,000 per year.
However, Powell noted that there is increasing concern about competition in the Security Information & Event Management space, particularly from one of Rapid7’s ( RPD ) customers, which accounts for roughly 25% of revenue, which could result in the company missing Wall Street estimates over the next six to 12 months.
“While valuation at 4.6x 2023E EV/sales is compelling, our uncertainty over the direction of Street [estimates] drives our decisions to start RPD at a Neutral rating,” Powell added.
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