Rapid7 Earnings: Strong Profitability and Top-Line Expansion as Competitive Threats Remain

We maintain our $45 fair value estimate for no-moat Rapid7 after the firm reported better-than-expected second-quarter results that were marginally ahead of our prior estimates. At the same time, however, we think Rapid7 occupies a tough, competitive area of cybersecurity. In an industry where vendor consolidation is on the up, smaller vendors such as Rapid7 are facing the squeeze. With the firm's Very High Morningstar Uncertainty Rating and lack of an economic moat protecting its business against larger vendors, we'd ask investors to avoid the name. Instead, for investors looking to invest in high-quality cybersecurity names, we'd point to moaty Fortinet, Palo Alto, Zscaler, and CrowdStrike as all attractive names currently trading at discounts to our fair value estimates.