Jeremy Bowman's Wells Fargo Case: Why Figma's 31% January Dive May Be Overdone

Figma shares tumbled 31% during January, marking another brutal month for cloud software stocks even as Wall Street remained largely supportive of the design platform’s long-term prospects. The selloff reflects broader sector anxiety rather than company-specific deterioration—a distinction that equity analysts at firms like Wells Fargo believe investors are missing.

The panic appears rooted in a single narrative: artificial intelligence could render software products like Figma obsolete by lowering the barriers to web design and related creative tasks. That concern reached crescendo in late January when major SaaS players including Microsoft, ServiceNow, and SAP reported earnings, disappointing investors with questions about future returns on their expanding AI capital expenditures.

The Sector Contagion Effect

What’s particularly striking about Figma’s decline is the absence of negative company-specific news driving the weakness. Instead, the stock fell victim to a sector-wide rout that claimed Adobe as well—the design software competitor dropped 16% over the same period. According to S&P Global Market Intelligence data, the slide accelerated throughout January’s final weeks.

The selling picked up steam partly because high-multiple software stocks have historically been vulnerability to sentiment shifts. Wall Street analysts, however, have largely maintained their bullish stance. Wells Fargo notably upgraded the stock to overweight status, arguing that Figma’s position as the design industry leader and proven ability to expand efficiently justify premium valuations.

The AI Risk Gets Overstated

Jeremy Bowman and other analysts examining Figma’s fundamentals push back against the doomsday framing. Even after the sharp decline, which extended into early February, Figma still trades at 12 times sales—well below the 20x or higher multiples common among software companies during peak euphoria. More importantly, the stock has fallen over one-third from its IPO price and roughly 85% from its post-IPO peak, suggesting substantial downside has already priced in.

The real question isn’t whether AI will eventually reshape design workflows—it probably will. Rather, it’s timing. True disruption would likely require years to materialize, if it occurs at all. Meanwhile, Figma continues operating as a fundamentally healthy business: it’s growing rapidly while maintaining profitability on a GAAP basis, and the platform remains an industry standard skill that employers actively seek.

The Valuation Paradox

The paradox facing Figma mirrors challenges across the SaaS sector. These businesses commanded premium valuations historically—10x to 20x sales was common. After the January correction, even at 12x sales, investors could be looking at a business that appears oversold relative to its competitive moat, revenue growth trajectory, and bottom-line strength.

Jeremy Bowman’s perspective aligns with the broader Wells Fargo outlook: a company with a proven market position, efficient unit economics, and expanding margins shouldn’t be punished this severely based on speculative AI displacement concerns. The fact that multiple Wall Street analysts maintained favorable recommendations despite the selloff suggests institutional investors recognize a disconnect between sentiment and reality.

Catalyst Ahead: Q4 Earnings

Figma is scheduled to report fourth-quarter results on February 18, providing clarity on whether the business is actually deteriorating or simply caught in a wave of misdirected sector panic. Consensus expectations call for revenue of $293.2 million and adjusted earnings per share of $0.06.

If those numbers hold or come in strong, Jeremy Bowman’s analysis and Wells Fargo’s recent upgrade could prove prescient. Conversely, disappointing guidance would vindicate some of the selling pressure. Either way, the upcoming report represents an inflection point for separating genuine business concerns from algorithmic selling driven by software-sector anxiety.

The core question for investors remains straightforward: is Figma a company facing genuine disruption, or a profitable market leader that has been swept into an unfounded correction? The answer to that question may hinge on whether you follow the market’s current fear trade or embrace the more measured perspective offered by seasoned analysts who see value in a temporary panic.