It has been three months since the design software company Figma began trading on the New York Stock Exchange under the ticker FIG. Shareholders are expressing significant anxiety about FIG’s future stock performance.
Figma’s Initial Public Offering (IPO) on July 31st achieved a substantial valuation of $19.3 billion, with initial FIG pricing set at $33 per share. Following its NYSE debut, FIG shares experienced a rapid surge, reaching $142.92, a fourfold increase that propelled its valuation close to $68 billion. This surge was consistent with prior reporting that indicated the Figma IPO had been oversubscribed 40 times.
IPOs often launch without a trading history, making it challenging to establish realistic expectations. Furthermore, the initial hype and a limited float can lead to insider investors securing profits, which may trigger a subsequent selloff. With three months of trading now completed, FIG stock has seen a decline of 54%, currently trading at $48.73 per share. This analysis will examine the company’s prospects and potential future valuation.
Was It Wise to Invest in Adobe’s Competitor?
Both Adobe (ADBE) and Figma (FIG) operate within the interactive product design market, providing Software-as-a-Service (SaaS) solutions. Their primary customer base includes sectors such as marketing, social media, branding, graphic design, and education. Adobe, the established leader in this space, made an offer of $20 billion to acquire Figma in 2022, a figure close to Figma's IPO valuation. However, the acquisition was terminated in late 2023 due to regulatory concerns.
Figma experienced significant benefits from the cancellation of the Adobe deal, including a $1 billion reverse termination fee. Investors have shown particular enthusiasm for Figma’s IPO due to its emphasis on collaborative product development. This feature allows multiple users to work on the same project concurrently, with changes visible in real-time, similar to collaborative document editing.
Figma has also integrated tools like Slack and Jira to improve workflow efficiency. The company employs a freemium model, designed to attract users and expand its customer base. These factors suggest that Figma has the potential to achieve widespread adoption comparable to Google Workspace.
However, both Adobe and Figma face potential disruption from emerging technologies. Google's Nano Banana (Gemini 2.5 Flash Image), introduced in late August, allows users to edit images using AI prompts with ease. This development is a significant advancement, as repeatedly generating content to achieve a desired outcome can be inefficient for professional use.
In June, there was a discussion regarding Adobe, positing that granular control over content editing would remain superior to AI-powered generation, particularly given Adobe's own capable Firefly model. Nevertheless, if the trend of text-to-edit capabilities continues to advance, the long-term valuations of both companies may depend more on their ability to adapt to AI-native workflows than on their design expertise.
Should Google integrate more of these AI editing features, its extensive reach could diminish the incentive for users to adopt Figma products for basic design tasks.
Figma’s AI Positioning Strengthens
Understanding the significant impact of AI on both Adobe and Figma, it is noteworthy that Figma recently announced the acquisition of Weavy, an Israeli AI startup, for $200 million. Weavy, founded a year ago, specializes in integrating existing AI models such as Sora, Veo, and Nano Banana to generate foundational elements. These elements can then be combined by users to create comprehensive outputs, including adjustments for color grading, lighting, and masking.
This acquisition provides Figma with a crucial component to remain competitive against future AI advancements. It positions Figma as an AI-agnostic layer within its platform. More importantly, by incorporating AI-driven primitives directly into its collaborative environment, Figma is enhancing its competitive advantage and establishing a stronger market position.
Figma’s Price Targets
Over the past twelve months, Figma generated $294.3 million in free cash flow (FCF). With a year-over-year revenue growth of 41%, reaching $249.6 million as of the second quarter, analysts project an annual FCF target of $367.5 million by 2029.
At this stage of its business development, determining Figma’s precise discounted cash flow (DCF) is complex. However, considering its price-to-earnings (P/E) ratio of 261.06 for the trailing twelve months (TTM), the stock appears overvalued. For comparative context, Adobe’s P/E ratio stands at 21.10 TTM.
In the last three months, ADBE stock has decreased by 5.5%, while FIG shares have lost 54% of their value. Despite this performance, the Wall Street Journal’s forecasts indicate that most analysts maintain a generally optimistic outlook, with no sell ratings, eight holds, and four buy ratings.
This sentiment translates to an average price target of $67.57 per share for FIG. Even the lowest price outlook is higher than the current trading price, at $49, while the highest forecast indicates a ceiling of $85 per share.