Figma stock is rising: a golden opportunity to buy at a bargain price?

Figma stock has rebounded modestly in the past few weeks and is showing signs of bottoming. FIG jumped to $26.35 on Thursday, up from the double-bottom level of $16.80. This rebound may continue in the foreseeable future as technicals and fundamentals align. 

Figma stock technicals points to more gains

The daily timeframe chart shows that the Figma share price has staged a comeback in the past few weeks. It formed a double-bottom pattern at $16.80, its lowest level in May and June this year. Its neckline was at $27.80, its highest point on June 1.

The double-bottom pattern has a height of $11. As a result, by adding this height to the neckline, its target comes at $38, which is about 47% above the current level.

More technicals are highly bullish on Figma shares. It jumped above the 50-day Exponential Moving Average (EMA). At the same time, the Relative Strength Index (RSI) and the MACD indicators have continued rising in the past few weeks.

The bullish forecast will become invalid if the price drops below the double-bottom level of $16.80.

Figma stock chart | Source: TradingView

Figma’s business is doing well despite AI disruption 

One reason why the Figma stock plunged after its initial public offering (IPO) is the ongoing SaaSpocalypse fears. In this, investors are concerned that advanced artificial intelligence tools by companies like Anthropic and OpenAI will disrupt its business.

Figma’s crash has also mirrored that of other companies in the software industry like Adobe, ServiceNow, and Atlassian. Recently, however, there are signs that the tide is changing, as evidenced by the recent Atlassian stock surge.

Also, there are signs that investors are starting to buy the dip. For example, Workday stock jumped sharply after reports that Silver Lake was considering a bid for the company. There is a likelihood that many of these software companies will become acquisition targets now that they have become bargains. For example, Figma has a market capitalization of $14 billion, much lower than the $20 billion that Adobe wanted to buy it for.

The most recent results showed that the company’s growth continued. Its revenue jumped by 48% to $370 million, better than its guidance. The revenue was also higher than what analysts were expecting.

More data shows that Figma’s gross margin jumped to 84%, with the company ending the quarter with $1.7 billion in cash. It has also continued to add more customers in the past few months despite the AI disruption fears.

There are signs that Figma has become a bargain, especially when using the rule-of-40 metric. Based on the non-GAAP operating margin of 10% and its revenue growth of 48%, it has a multiple of 58%. A Rule-of-40 multiple of 58 is a sign that it has become highly undervalued. 

The company will actually benefit from the ongoing AI boom as the management noted in the last earnings call. The CEO said:

“The opportunity is bigger than even we expected. The tools are changing, the creative possibilities are expanding and Figma finds itself at the forefront of this shift.”

This view explains why analysts are largely bullish on the stock. Citigroup has boosted the stock target from $35 to $37, while Morgan Stanley hiked it to $33. The most optimistic analyst is JPMorgan’s Mark Murphy, which has a target of $42.