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Rapid7shares (NASDAQ:RPD) surged more than 15% on Wednesday after the cybersecurity company reported second-quarter results and guidance, leading to praise from Wall Street.
Morgan Stanley analyst Hamza Fodderwala, who has an equal-weight rating on Rapid7 (RPD) shares, raised price target to $52 from $48, noted that profitability was “much better-than-anticipated.”
Separately, the company announced it would be laying off 18% of its employees, which Fodderwala said drives a “meaningful inflection” in the profitability outlook as management said it would double free cash flow in fiscal 2024.
“Ultimately, while we continue to see promise in the growing traction of Rapid7’s Managed Threat Complete and Cloud Risk Complete bundles … we remain on the sidelines at Equal-weight, looking for further signs of a materialization in the consolidation opportunity and sustained stabilization in the go-to-market motion amidst the ongoing restructuring program before turning more positive,” Fodderwala wrote in an investor note.
The layoffs are expected to result in charges between $24M and $32M, Rapid7 (RPD) added.
Needham analyst Alex Henderson, who has a hold rating on Rapid7 (RPD) shares, said the results were “solid” but the real takeaway was the 18% reduction in workforce.
“Laying off 18% of your workforce is a pretty major move,” Henderson wrote in an investor note, adding that reassigning other employees adds to execution challenges.
“Focusing on Cloud Native integrated Automation supported by managed Security services tightly integrating hybrid cloud and on-premise Security Information Management is a good strategic move. It will take time to deliver the benefits, but it sets up better growth and profitability long-term.”
