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Figma stock surged 247% after its IPO, hitting a market cap close to $60 billion.
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Impressive recent growth (more than 40% YOY) and widespread adoption highlight the platform's strength.
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At this valuation, investors must believe Figma can sustain rapid growth and fend off intensifying AI-driven competition.
Shares of Figma (NYSE: FIG) exploded this week after its public debut on Thursday. The stock is currently trading 253% higher than its initial public offering (IPO) price as of 3:17 p.m. ET. The extreme leap comes as the S&P 500 lost 2.4%, and the Nasdaq-100 lost 2.2% amid new tariffs and weak jobs data.
Figma, which offers a web-based design platform that is used to create websites and apps, IPOed on Thursday at $33 a share and is now trading above $118. The huge IPO eclipsed even the recent success of Circle Internet, which saw its stock triple in the first few weeks.
The company has now reached a valuation of nearly $60 billion. That is a pretty hefty valuation, given the company's 2024 sales of under $750 million. Granted, it has grown its top line by more than 40% in both of the last two years. That's pretty impressive.
I have doubts, however, about how long this trajectory can last. The company touts that “95% of the Fortune 500” used Figma in March of this year. While that number lends clout to the company and the quality of its product, it's a double-edged sword. It calls into question how much the company can continue growing its enterprise revenue if it is already so ubiquitous among the most important companies in the world.
I have serious doubts about the strength of Figma's moat and its ability to defend it in a hyper-competitive landscape actively being transformed by artificial intelligence (AI), at least at its current valuation. It would need to continue to deliver 40% growth for years to justify its current valuation and continue to offer investors a solid return.
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