Figma stock has crashed to a record low: is it a bargain or a value trap?

Figma stock price has crashed to a record low since its initial public offering (IPO), shedding billions of dollars in value as its valuation has dropped from over $55 billion to nearly $10 billion. This article explains why the FIG stock may rebound soon.

Figma stock has plunged amid the SaaSpocalypse concerns

Figma is a top company in the software industry, offering a suite for users to ideate, design, and build solutions. It has become one of the biggest competitors to companies like Canva and Adobe, which attempted to acquire it a few years ago.

FIG stock price has crashed amid the rising SaaSpocalypse concerns, which note that AI tools will ultimately replace these design tools. This explains why the Adobe shares have plunged to $230, down from $700 a few years ago.

Still, there are signs that these fears are being overblown as the company’s growth continues to accelerate. As we wrote on the Intuit stock, the ongoing SaaSpocalypse has created bargains that will surge over time.

The most recent results revealed that Figma’s revenue jumped by 40% in the fourth quarter, with its annual figure rising by 41% to $1.056 billion. This growth was driven by the international business whose revenue soared by 45%.

Most notably, the company continued to add more clients last year, even as AI models became more advanced. Its net retention rose to 137% as the number of paying customers spending over $10k a year rose to $13,860. It has 67 paid customers with over $1 million in ARR. Also, the number of weekly customers continued soaring.

Top analysts believe that the company’s business will continue doing well in the coming years. The average estimate among 10 analysts is that its annual revenue will be $1.37 billion this year, up by 30% YoY. Also, they expect its revenue to be over $1.65 billion in the coming year. As a result, it will get to over $5 billion in the coming years.

A key challenge for the Figma stock is that the company is losing substantial sums of money, with its net loss soaring to $1.2 billion last year, up from $793 million a year earlier.

This trend happened as the company continued boosting its research and development (R&D) spending, which moved from $751 million to $1.029 million. This means that the company may dilute its shareholders over time.

FIG stock price chart | Source: TradingView

The daily timeframe chart shows that the Figma share price has crashed in the past few months, falling from a high of $142 in August last year to $19. It has dropped below the important support level at $20.67, its lowest level in February this year.

The stock has remained below the Supertrend indicator and the 50-day Exponential Moving Average (EMA). At the same time, the Relative Strength Index (RSI) has slumped from 62.7 in February to the current 32

Therefore, the stock will likely remain under pressure in the near term and then bounce back later this year as fears about the AI disruption fade. Ultimately, the stock will rebound to the double-bottom’s neckline of $32.40.