Figma stock has staged a notable recovery from its record low of $16.80, climbing to $23.65 as a rare double-bottom pattern emerges on the daily chart. This technical formation, characterized by two troughs at the same price level, often signals a reversal of a downtrend. The stock has already broken above its 50-day exponential moving average, and the Relative Strength Index has risen to 61 from a year-to-date low of 17.83, indicating strengthening momentum.
Technical Setup Points to Further Gains
The double-bottom pattern's neckline sits at $27.80, the stock's highest point on June 1. A move above this level could open the door to the next resistance at $31.25, representing a potential 35% upside from current levels. This technical setup is reminiscent of other bullish patterns seen in the market, such as the inverted head-and-shoulders formation observed in ITW stock ahead of its earnings report.
Business Fundamentals Remain Strong Despite Sector Headwinds
Figma's business continues to thrive despite the so-called 'SaaSpocalypse' that has weighed on many software stocks. The company reported first-quarter revenue of $333.4 million, up 46% year-over-year and exceeding its own guidance. Customer growth remains robust: the number of clients paying over $10,000 annually rose to 15,218 from 11,107 a year earlier, while those paying $100,000 or more increased to 1,525 from 1,031. Notably, a single hyperscaler added 35,000 paid seats during the quarter.
Rather than being disrupted by artificial intelligence, Figma is leveraging the technology to enhance its platform and generate new revenue streams. In March, the company introduced AI credit limits for all customers without experiencing significant churn, demonstrating the stickiness of its product.
Upcoming Earnings Could Catalyze Further Upside
Management expects second-quarter revenue between $348 million and $350 million, representing 40% year-over-year growth. Full-year guidance calls for revenue of $1.422 billion to $1.428 billion, up 35% annually. Given the company's conservative guidance history, actual results may exceed these estimates. This pattern of conservative guidance followed by beats is similar to what has been seen in SoFi stock ahead of its earnings.
Wall Street analysts remain bullish. Bank of America has a $30 price target, while Wells Fargo's Michael Turrin sees the stock reaching $36. Piper Sandler, Citigroup, and JPMorgan all have targets above $30. The forward price-to-sales ratio of 7.7, while elevated, reflects the company's growth trajectory.
Risks to Consider
Figma faces increasing competition from established players like Adobe and Sketch. The company also continues to operate at a loss, with operating losses widening to $137 million in the first quarter. However, the strong customer adoption and AI monetization strategy provide a buffer against these headwinds.
For investors monitoring technical patterns, the double-bottom formation in Figma stock offers a compelling case for a rebound, especially with earnings on the horizon. As seen in other recent market moves, such as the Nasdaq futures jump driven by chip stock rebounds, technical patterns combined with fundamental catalysts can drive significant price action.
This article is for informational purposes only and does not constitute financial advice.
