Figma (FIG +3.95%), a maker of design software, has endured a brutal period following its initial public offering (IPO). Since peaking at an intraday high of almost $143 per share in August, the stock has dropped precipitously. Today, at around $34 per share, it has lost over three-fourths of its value from its high and is close to its July IPO price of $33 per share.
However, investors may take comfort in the fact that it established a low almost one month ago and has traded in a range since that time. Knowing that, could December be a turning point for Figma, or should investors expect more pain?
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Understanding Figma
Figma's stock attracted its initial interest because it leads a niche in collaborative design tools. The company's software helps teams create user interfaces and user experiences for apps and websites.
Not surprisingly, artificial intelligence (AI) has played a key role in its success. Thanks to its AI tools, users can more easily create layouts, graphics, and interactive prototypes in seconds and then refine them in its visual editor.
And Figma offers a key competitive advantage over similar products through collaboration, allowing multiple users to work on a file simultaneously. This keeps all parties informed of changes, which increases efficiency and, in many cases, can foster higher levels of creativity.
So powerful is this tool that Adobe tried to buy Figma. After antitrust regulators in Europe pushed Adobe to abandon the prospective merger, Figma remains the market leader.
Growth prospects
Still, as previously mentioned, the challenge with Figma may be profiting from investing in the stock. It benefited from a great deal of hype initially, but amid a significant pullback, investors appear to have decided the original IPO price was appropriate for the stock.
The struggle may stem from what are likely mixed feelings about its financials. In the first three quarters of 2025, its revenue of $752 million increased by 41% compared to the same period in 2024. Nonetheless, while that sounds impressive, Figma lost just over $1 billion in the first nine months of 2025, more than the net loss of $830 million in the same year-ago period.
The silver lining in this is that its stock-based compensation, a noncash expense, was more than $1.1 billion, $976 million of which was in the third quarter. That means Figma is probably generating enough cash to cover operational costs, since its free cash flow for the first three quarters was $204 million.
Still, while that expense may not cost the company cash, it potentially dilutes shareholders, which could still hurt the stock.
NYSE: FIG
Key Data Points
Furthermore, investors may struggle with what to make of Figma's valuation. As a money-losing company, it does not have a price-to-earnings ratio (P/E), but amid the falling stock price, its price-to-sales ratio (P/S) is 17.
Although that is not an unusual level for a growth stock, investors should remember that the S&P 500's average P/S ratio is around 3.5. Hence, the question for investors is whether it has fallen far enough to stoke a recovery.
Is a turning point near?
Although December could become a turning point for Figma stock, no such evidence has yet appeared. In a sense, it's encouraging that the stock's value has plateaued near the IPO price. That could create the sense that investors can now buy Figma at a fair price. Moreover, a meaningful improvement in its product or financial situation could prompt investors to buy.
However, no such catalyst has become apparent. And investors are also probably right to feel concerned about the company's huge stock-based compensation. Even though losses primarily involve noncash expenses, it creates the potential for meaningful stock price dilution.
Ultimately, the power of Figma's software should continue to boost revenue and eventually the stock price. Nonetheless, at its current valuation, the company is likely in need of either a meaningful catalyst or at least a better handle on its stock-based compensation expenses before the shares recover.
