If there’s one sector that is basically guaranteed to grow in the years ahead, it’s cybersecurity — especially as hackers become increasingly sophisticated, observes Mike Cintolo, growth stock specialist and editor of Cabot Top Ten Trader.
Rapid7 (RPD) offers an Insight security management platform that reduces risk across an enterprise’s entire connected environment, allowing clients to look for malicious behavior, investigate and shut down attacks or automate operations.
Rapid7 saw its key metrics accelerate in Q2, with revenue soaring a consensus-beating 28% from a year ago. Per-share earnings of 7 cents, meanwhile, easily beat management’s guidance and analyst forecasts of 5 cents, driven by strong demand across the company’s Insight platform.
Rapid7’s subscription-based model continues to boast high customer retention rates while its growth remains steady, with sales growth averaging around 28% over the last eight quarters. Annualized recurring revenue increased 29% in the second quarter (to $489 million), total customer growth was 13% and recurring revenue per customer rose 14%.
Another Q2 highlight was the closing of the acquisition of InSights Cyber Intelligence, a leading provider of threat intelligence, and the company's launch of InsightCloudSec, a cloud-native security platform that combines the container security capabilities of Rapid7’s offerings into the Insight platform.
Management guided for Q3 revenue of around $134 million (up 28%) and full-year sales of around $522 million (up 27%), in line with estimates.
Zscaler (ZS) is definitely one of the new-age leaders with a solution built from the ground up for the cloud age: With the old model of protecting information residing in a data center blown away by the cloud, Zscaler’s offerings can connect and secure users, devices and apps using whatever business policies are wanted over any network.
The company calls it a Zero Trust Exchange, where users are connected to apps (not the entire network), apps and workloads themselves are invisible to the outside (can’t be attacked) with zero passthrough connections — basically decoupling security from the network itself and decoupling app access from network access (you only use what you’re supposed to use).
It’s been a hit, with one-quarter of the Forbes 2000 already signed on as customers (5,000 clients in total with more than 20 million licensed seats), for whom Zscaler claims it blocks seven billion security events or policy violations every day.
Revenue growth has been accelerating in recent quarters and ripped ahead 60% in the latest quarter (including 26% same-customer growth), though earnings have been more lumpy as the top brass has stated its willingness to invest big money in order to capture what it sees as a $72 billion opportunity and 335 million potential licensed seats. The next big event will be earnings, which are due out September 9.
