Key Takeaways:
- Figma, a cloud-based UX/UI software company, is looking like a smart buy despite a volatile IPO
- The stock is currently trading at a lower price than Adobe’s valuation of the company in 2022
- Figma is investing heavily in AI, which could make it the dominant company in web design software
- The company continues to deliver strong growth, with revenue up 38% in the third quarter
- Figma’s valuation looks reasonable compared to other software stocks, with a price-to-sales ratio of roughly 15
Introduction to Figma’s IPO
Figma, the maker of cloud-based UX/UI software, has had a volatile IPO experience. The stock listed at $33 a share and immediately jumped to a high of $142.92 after going public on July 31, only to give up nearly all of those gains. As of January 9, the stock closed at $37.33, just slightly above its IPO price, down nearly 75% from its peak. According to the article, "IPOs tend to be volatile, but this one has been especially so." This volatility is likely due to the company’s reported earnings, which have disappointed the market despite strong results.
Figma’s Valuation Compared to Adobe’s Offer
In 2022, Adobe agreed to acquire Figma for $20 billion, but the deal was broken up by regulators on antitrust grounds, leading to Figma’s IPO last year. Notably, Figma’s market cap is now below where Adobe valued the company four years ago, when it was much smaller and AI hadn’t entered the public conversation. As the article states, "Adobe did offer a substantial premium for Figma, as most acquisitions go, but that price tag should serve as a floor for the stock." This suggests that Figma’s fundamentals are much stronger now, and the price that Adobe would be willing to pay for it would likely be much higher.
Figma’s Investment in AI
Figma is making big moves in AI, which is a natural fit for UX/UI software. The company has launched several AI-powered tools, including Figma Make, Figma Sites, and Figma Buzz. It has also acquired Weavy, an AI-powered designed interface, which has been rebranded as Figma Weave. As the article notes, "It makes sense for Figma to invest in AI, as UX/UI is a natural fit for chat and prompt-based tools." However, Wall Street punished the company for saying that investments in AI would cut into its profit. Despite this, Figma’s investment in AI could make it the dominant company in web design software.
Figma’s Financial Performance
Figma continues to deliver strong growth, with revenue up 38% to $274.2 million in the third quarter. Adjusted operating income was $34 million, showing that the company is still solidly profitable. As the article states, "The company has a history of being profitable on a generally accepted accounting (GAAP) basis though one-time non-cash expense in the third quarter related to the IPO led to a large GAAP." Based on run rate revenue, Figma is trading at a price-to-sales ratio of roughly 15 after backing out $1.5 billion in cash and marketable securities. This valuation looks reasonable compared to other software stocks, especially considering Figma’s investments in AI and profitability.
Conclusion and Outlook
In conclusion, Figma’s stock looks like a smart buy despite its volatile IPO experience. The company’s valuation is lower than Adobe’s valuation of the company in 2022, and its investment in AI could make it the dominant company in web design software. Figma’s financial performance is strong, with revenue up 38% in the third quarter, and its valuation looks reasonable compared to other software stocks. As the article notes, "From its current price, the stock looks like a good candidate to double or better this year." With its strong fundamentals and growth potential, Figma is definitely a stock to watch in the coming year.
https://www.fool.com/investing/2026/01/10/this-artificial-intelligence-ai-stock-is-a-drop-de/