Shares of Figma (FIG 5.63%) 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.
Figma's stock is red hot
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.
Image source: Getty Images.
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.
