Figma’s (FIG) honeymoon period has come to an end. Last week, the digital design specialist made its debut on the NYSE at $33 per share and quickly rose by ~250% as investors piled into strong bullish sentiment. Figma intends to disrupt longstanding market leader Adobe (ADBE) and comes to the public market already profitable and with a differentiated position in the digital design space.
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Figma’s stock offering was oversubscribed by a factor of 40, leaving most retail investors on the sidelines. Fast-forward to this week, the stock has cooled slightly and now trades below $100 per share. Although FIG’s valuation has now ballooned, there is still plenty of upside potential — assuming the market retains its positive sentiment towards the stock.
Given how erratic current sentiment is, I’m maintaining a Neutral stance due to valuation risks. However, for investors who managed to secure an entry at IPO pricing, the outlook is highly positive moving forward. If I were in their shoes, I would only consider selling if I were actively rotating into other high-alpha opportunities.
Figma Stock Isn’t as Speculative as it Seems
Figma is now a dominant cloud-native design collaboration platform, used by 75-95% of America’s listed companies. The platform secures more than 13 million monthly active users, and the majority of these are not even designers, which means the platform has widespread enterprise utility (this expands the long-term growth opportunity).
These strong operations and product positioning have reflected positively on the company’s financials. In Fiscal 2024, revenue grew by 48% year-over-year, and in Q1 of Fiscal 2025, net income grew by 46% year-over-year to $44.9 million. The gross margin is also 90%, and the bottom-line profitability is rare for an IPO, bolstering the IPO-day investment case.
There are other positives to this investment case, which make it stand out as truly exceptional from the perspective of financial health on the back of operational excellence. For example, Figma has about $1.5 billion in cash and minimal liabilities, making it agile and able to fund future growth initiatives easily. This agility and expansion potential is further evidenced by a positive free cash flow margin of about 25%.
Moreover, the company is ranked in the top 5% of Software-as-a-Service businesses based on a “Rule of 40” score of about 75 (free cash flow margin + revenue growth rate).
Strong IPO Adds Risk to Figma’s Valuation
Despite Figma’s strong underlying business, the stock carries significant risk at current levels. With a forward price-to-sales ratio of 60, even minor underperformance in future earnings could trigger substantial volatility. That’s not to say the stock can’t deliver strong returns from here, but the valuation demands caution. It’s undeniably expensive — and while high quality often commands a premium, there’s always a risk of overpaying. In this case, investors are clearly paying up, and while some are comfortable doing so for a standout company, it’s a decision that requires conviction.
Relative to peers, the valuation looks even more stretched. Adobe trades at a forward price-to-sales multiple of just 6.25, and Canva — still private — is likely to be valued at a lower multiple. To be fair, Adobe’s expected revenue growth of 10% trails Figma’s by a wide margin, and Canva hasn’t yet earned a public-market premium. Still, the gap is noteworthy.
In a base-case scenario, Figma could reach $2 billion in revenue by the end of Fiscal 2027. Assuming a forward price-to-sales multiple of 35 by December 2026, that would imply a market cap of around $70 billion within 16 months. With the current valuation already near $60 billion, the potential upside over the next year appears limited to just 10–15% — and that’s assuming everything goes right.
Is Figma a Good Buy?
With the IPO just a few days behind us, there are no official analyst ratings yet on TipRanks. However, based on independent research, it’s clear that Figma is widely respected among analysts for its industry-leading growth, profitability, and strategic positioning.
That said, valuation concerns are a common theme—and they closely mirror my own. A forward price-to-sales ratio of 60 is hard to justify for many, even for a company of this caliber. While Figma is undoubtedly a top-tier business, the setup feels somewhat reminiscent of Palantir (PLTR) in its early public days—high potential, but limited historical precedent to anchor near-term expectations.
Given that, a cautious approach seems prudent. Initiating a small position—less than 2% of a portfolio—while balancing it with more conservative, value-oriented holdings could help manage risk while still leaving room to participate in Figma’s long-term upside.
Risk is Inextricably Linked to Returns
Figma has demonstrated some early hallmarks of being an exceptional business with a tangible market edge capable of delivering stable earnings over time. The digital disruptor holds a distinct competitive edge in a high-growth market and is successfully challenging Adobe’s long-standing dominance. It would seem there is more to come.
Naturally, when a company of this caliber goes public, investor enthusiasm follows—and rightly so. But while great returns often come from being contrarian, there’s nothing contrarian about Figma right now. It’s one of the most talked-about stocks on the market, and that alone warrants caution.
Given the elevated valuation and the speculative nature of any near-term upside, I’m staying on the sidelines for now and maintaining a Neutral rating.