Is Figma's 80% Plunge a Bargain or a Warning Signal?

When a high-flying growth stock crashes 80%, it naturally catches investors’ attention. Figma, the cloud-based design collaboration platform that debuted at $33 per share on July 31 and soared to $122 the very next day, now trades around $24. At first glance, a 30% drop from its IPO price might look like a discount opportunity. But here’s the critical question: Is this crash the market finally getting it right, or a genuine value opportunity? The answer is more nuanced than it appears.

A Genuinely Useful Product That Changed Design Workflows

To understand Figma’s appeal, imagine transforming how teams collaborate on design projects the way Google Docs revolutionized document collaboration. Before Figma, designers and developers would endlessly shuttle design files back and forth, creating bottlenecks and version control nightmares. Figma solved this by introducing real-time, cloud-based collaborative design—a seemingly simple concept that even legacy powerhouses like Adobe struggled to perfect for years.

This isn’t just theoretical innovation. The product genuinely filled a gap in the market and became the go-to platform for bridging communication between design and development teams. That foundation matters because it means Figma isn’t a solution chasing a problem—it’s addressing a real workflow inefficiency that companies were desperate to solve.

The Customer Retention Story: Where Figma Shows Real Strength

The true test of any SaaS business lies not in acquiring customers, but in keeping them. Figma’s most impressive metric isn’t raw user growth—it’s the explosion of high-value customer relationships.

In the quarter ending September 30, Figma reported 1,262 customers with annual recurring revenue (ARR) of at least $100,000, representing a staggering 385% increase year-over-year. Even more significantly, roughly 30% of these high-value customers were actively using Figma Make, the company’s AI-powered design tool, on a weekly basis. This matters because customers spending six figures annually don’t just casually use a platform—they embed it into their entire design infrastructure. They tend to stick around, and they expand their usage over time.

The company also grew its base of customers paying at least $10,000 annually from 9,762 to 12,910—an increase of 3,148 customers year-over-year. These numbers suggest that Figma isn’t just acquiring users; it’s building lasting, revenue-generating relationships with increasingly sophisticated customers.

Financial Growth Outpacing the Market’s Concerns

Despite the stock’s dramatic decline, Figma’s financial trajectory has remained solid. Revenue climbed 38% year-over-year to $274.2 million in the last reported quarter, pushing its annual revenue run rate past the $1 billion milestone for the first time. That’s meaningful growth for a company that went public in 2023.

The operating loss of $1.1 billion in that same quarter requires context: $975.7 million stemmed from one-time stock-based compensation payouts, a standard occurrence when newly public companies face employee equity vesting. Strip away that accounting artifact, and the underlying business is actually maintaining positive cash flow—a crucial sign that Figma isn’t burning cash on unprofitable operations.

Management is deliberately choosing to reinvest aggressively rather than chase near-term profitability, which is a reasonable strategy for a growth-stage company building market dominance. The cash flow remains healthy, which is what truly matters.

The Valuation Paradox: Why a 70x P/E Still Feels Expensive

Here’s where the stock’s apparent discount becomes deceptive. At $24, Figma trades at approximately 70 times its projected earnings for the next twelve months. While this represents a dramatic fall from its 329x peak valuation, it remains extraordinarily expensive. To put this in perspective, Nvidia trades at 25x earnings, Amazon at 29x, and Meta Platforms at 24x. Even at a 30% discount from its all-time peak, Figma commands a premium that’s tough to justify relative to these established powerhouses.

The software industry has seen this pattern repeatedly with high-flying names like Zoom and Snowflake. Both experienced meteoric rises, only to face prolonged declines that lasted far longer than investors expected. The initial collapse from absurd valuations to merely expensive valuations doesn’t automatically signal the bottom—it can simply be the first leg down in a longer correction.

The Discount Trap: Why Lower Prices Don’t Always Mean Better Value

The psychological trap in investing is assuming that a 80% decline means you’re getting a deal. It doesn’t. A stock that’s down 80% from a wildly inflated valuation can still be overpriced. Figma at 70x earnings isn’t cheap—it’s just less insanely priced than before.

The real risk is that investors become enamored with “buying the dip” without questioning whether the foundation beneath the dip was ever solid to begin with. Figma has a strong product and demonstrable customer loyalty, but those strengths don’t automatically justify a 70x earnings multiple in a competitive landscape.

The Wait-and-See Approach Makes More Sense

Figma presents a paradox: legitimate business quality meeting questionable valuation. The growing roster of high-value customers, the product-market fit, and the positive cash flow are all genuine positives. The company isn’t facing an existential crisis.

However, the fact that Figma remains richly valued even after such a severe correction suggests the market may need to be more persuasive before investors jump in. Sometimes the most profitable move isn’t catching a falling knife but waiting for the dust to settle and the price to align with fundamentals. For Figma, that alignment hasn’t happened yet—even with the 80% discount.

Investors should focus on what matters most: robust revenue growth, a expanding base of loyal, high-paying customers, and the competitive advantage of a product teams genuinely depend on. But until the stock’s valuation compresses further, Figma remains a “show me more” rather than a “buy now” proposition.