Figma Stock Downside To $40
Valuation Leaves No Room For Error
Currently, Figma is trading at nearly 37 times the estimated revenue for 2025. This high multiple is somewhat justified by Figma's robust growth and the potential for substantial margins. Revenues jumped from less than $100 million in 2021 to $749 million in 2024. In the March quarter, Figma reported $228.2 million in revenue, marking a 46% year-over-year increase, placing it on a $913 million annualized run rate. The company also has the potential for high margins due to its well-balanced cost structure, which contrasts with many other emerging SaaS providers that excessively spend on sales and marketing. But what happens if growth slows? If revenues grow at an average annual rate of approximately 15% from fiscal year 2025 to fiscal year 2028, sales would only reach around $1.6 billion. By applying a more conservative 14 times sales multiple – still high compared to mature competitors such as Adobe at 7.5 times forward sales, Microsoft at 12.5 times, or even Snowflake at 12 times despite quicker growth – Figma's market cap would be closer to $22 billion. This translates to approximately $44 per share, which is about half of the current price.
We also present a counter-scenario detailing how Figma stock can double to $160. In fact, we believe that this wide range of potential upside and downside illustrates a simple truth: Figma is a volatile stock.
How Growth May Falter
The likelihood of this outcome is quite plausible – competition, customer fatigue, and limited market penetration beyond core design teams could all work together to slow growth to mid-teen percentages. While Figma is favored by designers and exhibits strong customer retention, its leading position is not guaranteed. Microsoft (NASDAQ:MSFT) is integrating design and whiteboarding tools into its widely used Office 365 suite, potentially attracting enterprise users who prefer integration over specialization. See Microsoft's revenue breakdown. The smaller competitor Canva is expanding its offerings, while AI-driven tools from startups and model developers like OpenAI might fundamentally alter workflows and lessen the dependency on conventional design platforms. Should competitive pressures increase, Figma's product-led growth could stagnate. Here's a closer inspection of Key risks for Figma stock.
Additionally, Figma's long-term bullish outlook relies on expanding its market beyond its original designer base to include software developers, marketers, and cross-functional teams. This presents a significantly more challenging task than merely winning over design teams. Without significant progress in these adjacent markets, Figma risks becoming stagnant in a niche, which could hinder its ability to warrant valuations seen with tech giants. Enterprise adoption is also still in nascent stages, with just over 1,000 clients paying $100,000 or more annually. If Figma fails to grow its high-value enterprise presence, both revenue growth and margin expansion may fall short of expectations.
Another emerging risk is supply. Figma's IPO only released a small percentage of shares, with approximately two-thirds still owned by insiders under a lockup agreement. Once this expires in early 2026, insiders will be able to sell their shares. If growth slows down, more insiders might choose to sell, putting additional pressure on the stock.
Figma possesses all the characteristics of a high-quality SaaS business – such as a sticky product, robust gross margins, and strong net dollar retention. However, trading at almost 37 times sales, investors appear to be factoring in years of rapid and flawless execution. For investors, this situation renders the stock a high-risk bet, where even minor disappointments could lead to a substantial correction. As an alternative, the Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stock benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices), delivering strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks has provided a responsive way to capitalize on favorable market conditions while minimizing losses when markets decline, as detailed in RV Portfolio performance metrics.
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