Figma's shares are trading dangerously close to their record low, weighed down by persistent concerns about artificial intelligence disrupting the software-as-a-service (SaaS) industry. The stock recently dipped to $18.90, just above its all-time low of $16.48, and has now lost more than 86% of its value from its peak. Investors are left wondering whether the sell-off will extend or if a rebound is on the horizon.
AI fears continue to pressure Figma
Since its public debut, Figma has faced intense scrutiny over the potential impact of AI tools on its design platform. This anxiety, often dubbed 'SaaSpocalypse,' has dragged down the entire software sector. ServiceNow has tumbled over 37% from its October high, Salesforce has fallen 20% from its peak, and other major players like Workday and Adobe have also seen significant declines.
Despite the gloomy sentiment, Figma's fundamentals remain robust. In its latest earnings report, the company posted a 43% year-over-year revenue increase to $391 million in the third quarter, with gross margins expanding to 80%. The net dollar retention rate stood at an impressive 131%, indicating that existing customers are spending more. The number of clients paying over $10,000 annually rose to 15,566, while those spending more than $100,000 increased to 1,117.
Moreover, Figma has seen growing adoption of its AI features. The CEO highlighted the transformative potential of AI, stating, 'AI is opening up new possibilities for how products get built, and we see incredible opportunity for Figma to shape what comes next.'
Analysts remain cautiously optimistic
Wall Street analysts expect Figma's revenue growth to continue, despite the AI headwinds. The consensus estimate for fourth-quarter revenue stands at $403 million, a 33% annual increase. The company itself guided for revenue between $401 million and $404 million, suggesting it may again beat expectations, as it has consistently done since going public.
Several analysts have maintained bullish price targets, even after trimming their outlooks. Citigroup's Tyler Radke has a target of $34, JPMorgan sees $24, Royal Bank of Canada expects $24, and Wells Fargo projects $30.
Technical analysis signals further downside
From a technical perspective, Figma's stock has been in a downtrend, falling from $31.30 on August 27 to $18.97. It remains below its 50-day exponential moving average (EMA), a bearish indicator. More concerning is the formation of a head-and-shoulders pattern, a classic reversal signal that often precedes further declines. The neckline of this pattern is at $16.48, and a break below that level could open the door to a drop toward $15 support.
However, some analysts point to the possibility of a short squeeze in the long term, as the stock may be in an accumulation phase. Given Figma's solid fundamentals, including strong growth and a path to profitability, a reversal cannot be ruled out.
This article is for informational purposes only and does not constitute financial advice.
