Figma Stock Falls To $40?
Interface design software company Figma (NYSE:FIG) made a spectacular public debut last month, with shares rising from their $33 IPO price on opening day to about $80 per share currently, giving the company a market cap of roughly $40 billion. Investors have been willing to pay a steep premium for the company’s rapid growth, high retention, and product-led adoption strategy. Yet at today’s levels, the margin for error is low. With growth expectations running hot, any slowdown could leave the stock exposed to a sharp re-rating. In fact, we explore a scenario under a more cautious set of assumptions that could see Figma stock fall by 50% to levels approaching $40 a share.
Valuation Leaves No Room For Error
At present, Figma trades at nearly 37x estimated 2025 revenue. That’s a rich multiple, that’s partly justified by Figma’s strong growth and potential for thick margins. Revenues surged from under $100 million in 2021 to $749 million in 2024. In the March quarter, Figma posted $228.2 million in revenue, up 46% year-over-year, putting it on a $913 million annualized run rate. The company also has potential for high margins, given its balanced cost structure that is in contrast with many other young software as service providers who spend disproportionately on sales and marketing. But what if growth slows? If revenues rise at an average annual rate of just about 15% from FY’25 to FY’28, sales would reach only about $1.6 billion. Apply a more grounded 14x sales multiple – still rich compared to mature peers like Adobe at 7.5x forward sales, Microsoft at 12.5x, or even Snowflake at 12x despite faster growth, and Figma’s market cap falls closer to $22 billion. That equates to about $44 per share, roughly half the current price.
We also provide a counter scenario which details how Figma stock can double to $160. Indeed, we believe this broad range of upside and downside potential represents a simple fact: Figma is a volatile stock.
How Growth May Falter
The odds of this outcome are pretty real – competition, customer fatigue, and limited penetration beyond core design teams could all conspire to pull growth down to mid-teens levels. Although Figma is loved by designers and shows strong customer retention, its leadership position is not unassailable. Microsoft (NASDAQ:MSFT) is bundling design and whiteboarding tools into its widely adopted Office 365 tools, potentially capturing enterprise users who value integration over specialization. See Microsoft’s revenue breakdown. Smaller player Canva is broadening its suite, while AI-native tools from startups and model builders like OpenAI could fundamentally change workflows altogether and reduce reliance on traditional design platforms. If competitive pressure mounts, Figma’s product-led growth could stall. Here’s a closer look at Key risks for Figma stock
Moreover, Figma’s long-term bull case depends on moving beyond its original designer base into software developers, marketers, and cross-functional teams. That is a much harder challenge than simply winning over design departments. Without meaningful traction in these adjacent markets, Figma risks plateauing in a niche, limiting its ability to justify tech-giant multiples. Enterprise adoption is also still in its early stages, with only a little over 1,000 customers paying $100,000 or more annually. If Figma fails to scale its high-value enterprise footprint, both revenue growth and margin expansion could lag expectations.
Another looming risk is supply. Figma’s IPO floated only a small fraction of shares, with about two-thirds still held by insiders under lockup. Once this expires in early 2026, insiders will be free to sell. If growth cools, more insiders could sell putting more pressure on the stock.
Figma has all the traits of a high-quality SaaS business – including a sticky product, strong gross margins, and healthy net dollar retention. But trading at nearly 37x sales, investors are probably pricing in years of rapid, flawless execution. For investors, that makes the stock a high-risk wager where even modest disappointment could trigger a deep correction. As an alternative, the Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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