4 days ago
How Figma Stock Doubles To $160
Interface design software company Figma (NYSE:FIG) has had a rocky ride over the last few weeks, despite a stellar debut on the public markets last month. While the stock soared by more than 3x its IPO price of $33 to close at $115.50 per share on its first trading day, the stock has since corrected to about $80 per share currently. Yes, the stock is already running hot, trading at about 37x estimated 2025 revenues and about 29x estimated FY'26 sales. But execution has been strong, and several tailwinds could still fuel upside - it combines several in-demand trends: software-as-a-service tools, collaborative product design, and a big push into generative artificial intelligence. In this article, we look at how the stock could roughly double to $160 per share.
Revenue Growth
The company's financial growth has been explosive. Revenues surged from under $100 million in 2021 to $749 million in 2024. In the March quarter, Figma posted $228.2 million in revenue, up 46% year-over-year, putting it on a $913 million annualized run rate. Consensus estimates call for about $1.1 billion in revenue for this fiscal year. If Figma can maintain about 35% annual growth over the next four years, sales could approach $3.7 billion by FY'29.
There are a couple of factors that could support this high growth rates. Customers seem to be highly engaged with the company's offerings. Net Dollar Retention was 132%, indicating that existing customers are spending 32% more each year - a strong signal of product stickiness and expansion. Figma's pricing is seat-based, depending on the role - designer, developer, or viewer - and it benefits from a product-led growth strategy where adoption often begins with a single designer and then spreads organically across the organization. This approach minimizes customer acquisition costs and apparently shortens the sales cycle. Originally built for web and mobile interface design, Figma is now pushing into broader collaboration tools: presentations, no-code web development, and cross-functional workflows. This expansion could open up a much larger market beyond its design roots. Separately, here's a closer look at Key risks for Figma stock.
How Profitability Accelerates
Figma is also now generating profits, with net income over the last quarter standing at $44.9 million on $228 million in revenues, translating into a close to 20% net margins. Net margins could eventually keep trending higher, as sales grow, given the strong operating leverage SaaS companies have. If net margins can gradually grow to 30% by FY'29, profits could approach $1.1 billion by 2029. That's a big number, but it is achievable. For comparison, Adobe's net profit margins have stood at a little over 30% in recent quarters.
Moreover, Figma has been running a pretty tight ship. It recently clocked gross margins of about 90% and has a strong subscription model, fueling expansion. The company also maintains a balanced cost structure, with R&D spend nearly equal to sales and marketing, suggesting a disciplined focus on product innovation over aggressive selling. This is in contrast with many other young software as a service providers who spend disproportionately on sales and marketing, rely on top-down, enterprise-focused sales strategies. This should make strong margin expansion a real possibility in the coming years.
Talking Multiples
Trading at over 37x estimated 2025 run-rate revenue, Figma's valuation is well above that of mature peers like Adobe, which trades at around 7.5x forward sales. However, as the company evolves and posts consistent annual profits, the price-to-earnings (P/E) multiple becomes a more useful yardstick. If sales rise to about $3.7 billion with profits of roughly $1.1 billion, the valuation math changes. For comparison, data warehousing software major Snowflake currently trades at about 175x FY'26 earnings and about 125x forward earnings, while posting revenue growth of under 25% annually. More niche work management platform, Asana trades at about 60x forward earnings despite posting single-digit revenue growth rates. Considering this, it's not a stretch to give Figma a 70x P/E multiple, which would translate into a market cap of about $77 billion, a little less than 2x the current $40 billion. Sure, stock-based compensation and fresh equity issuance will cause dilution, but the broader upside thesis still holds.
Of course, several things need to fall into place. A key factor will be whether Figma can become indispensable across the workplace, not just for designers but also for software developers, marketers, product managers, and other teams. The company also needs to hold its ground against intensifying competition and improve margins at the same time. Microsoft (NASDAQ:MSFT) is bundling design tools into Office 365, Canva is rapidly broadening its suite, and AI-native tools from the likes of OpenAI could reshape workflows and reduce dependence on traditional design platforms. See Microsoft's revenue breakdown.
What about the time horizon? Whether this scenario plays out over three or four years may not matter much, as long as Figma stays on its revenue expansion trajectory with margins trending higher, the stock could respond similarly in either case.
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