Figma Stock Plummets 55%: Investment Opportunity?

Figma (NYSE:FIG), an interface design software company, has experienced a significant decline in its stock price, dropping nearly 24% over the past month and remaining down over 55% from its post-IPO peak in July. Such volatility is typical for newly public companies, but Figma's high valuation at listing, trading at over 60 times forward sales, exacerbated the sell-off. Investors who joined the post-IPO rally may now face substantial losses, while new buyers question if the dip presents a rare buying opportunity.

The price correction is driven by cooling revenue momentum. Figma's second-quarter sales rose 41% year-over-year to $249.6 million, a decrease from the 46% growth rate in Q1. The slowdown is expected to continue, with Q3 revenue projected to rise 33% at the midpoint of guidance. This trend indicates a significant deceleration in Figma's growth trajectory, especially considering its high valuation. The company's full-year forecast of about 37% growth suggests Q4 growth might further ease to around 30%.

The decision to allow about 25% of employee-held shares to be sold from September 5 also contributed to the sell-off. IPO lock-up expirations often create selling pressure as insiders and employees gain the ability to cash out. Although top executives were excluded, many employees likely took profits after the stock's sharp post-IPO appreciation. A longer, extended lock-up agreement covering most major stakeholders will continue until mid-2026.

Following the sell-off, Figma stock trades at approximately 25 times estimated 2025 revenue, significantly down from the 60 times levels of its post-IPO peak. At these levels, the stock may seem more accessible, but investors must weigh growth prospects against risks. Figma's product is popular among customers, with strong retention and workflow lock-in. However, competitors like Microsoft are integrating design tools into widely used platforms, and emerging AI-native tools could disrupt traditional design platforms.

Figma's future relies more on execution than past hype. The company's ability to expand beyond its core designer base to capture a broader enterprise audience is crucial. Without progress in these adjacent markets, Figma risks stagnation in a niche segment, potentially hindering its ability to achieve valuations seen with large tech giants.