Should You Buy Figma Stock After Its 59% Drop Since August?

Core Viewpoint - Figma's stock has experienced significant volatility following its IPO, with a notable decline in growth rates raising concerns about its future performance and valuation [4][10][14]. Financial Performance - Figma reported second-quarter revenue of $250 million, reflecting a 41% year-over-year growth, but this represents a deceleration from the 46% growth in the first quarter [6][8]. - For the third quarter, Figma anticipates a revenue growth of 33% at the midpoint of its guidance range, indicating a continued decline in growth rates [7]. - The company is projecting a 37% revenue increase for the full year of 2025, which implies a 30% growth rate for the fourth quarter [8]. Valuation Concerns - At its peak, Figma's stock traded at over 66 times sales, a valuation that is considered high, especially given the slowing growth [8][10]. - Despite the recent sell-off, Figma is still trading at over 30 times sales, indicating that it remains one of the more richly valued software stocks [14]. Customer Base and Growth Challenges - Figma has successfully acquired a broad customer base, with 78% of the Forbes 2000 companies using its software, and around two-thirds of these customers utilizing three or more products [11]. - The company's growth may be hindered by the limited number of large customers available for acquisition and the challenges of upselling existing customers who already use multiple products [12][13]. Future Outlook - Figma has $1.6 billion in cash and marketable securities, providing resources for research, development, or acquisitions to sustain growth [15]. - However, the current valuation risk is elevated due to the slowing growth, leading to a cautious outlook on the stock's performance [15].