At any time when an organization goes public, you will usually learn and listen to numerous buzz about it. Sadly, investing within the hottest preliminary public providing (IPO) shares regularly backfires.
Take Figma(NYSE: FIG) for instance. The inventory soared, greater than tripling on its first day of buying and selling. Since then, the inventory has collapsed. Figma at the moment trades practically 70% off its excessive, a catastrophic end result for anybody who initially purchased and held shares.
Figma is not the primary IPO inventory to clean out, nor will or not it’s the final. Traders should not maintain that towards Figma.
As an alternative, now is an efficient time to revisit the corporate as a result of it has such a excessive ceiling that it is arguably the very best development inventory you should buy for $50 proper now. Right here is why.
Picture supply: Getty Photographs.
Finally, there isn’t any substitute for human creativity. Nonetheless, it has develop into clear that synthetic intelligence (AI) and different applied sciences will play an more and more bigger function in shaping how folks innovate and create content material, whether or not that is artwork, leisure, or some other digital expertise.
Figma, a digital creativity software program firm, is coming of age at exactly the fitting second.
The corporate’s software program, infused with AI capabilities, allows customers to create digital experiences, starting from web sites to functions and social media content material. What’s distinctive about Figma is how simply it permits customers to collaborate. With its multiplayer characteristic, a number of customers can collaborate on a single challenge in actual time. They will even see one another’s cursors transfer throughout their display.
Figma’s success compelled Adobe, the incumbent chief in creativity software program, to try to accumulate it. The 2 corporations agreed to a deal value $20 billion, nevertheless it fell via because of regulatory scrutiny.
It has labored out properly for Figma to stay impartial. It acquired $1 billion from Adobe as a merger termination price, and the corporate went on to IPO a few years later.
Income grew by 38% yr over yr within the third quarter, placing trailing-12-month income at simply shy of $1 billion. Importantly, Figma is already extremely worthwhile, with roughly $269 million in free money circulate over the previous 4 quarters, accounting for roughly 28% of income.
Admittedly, Figma did problem a whopping $1.1 billion in stock-based compensation this yr. Extreme stock-based compensation creates a danger of share dilution, however on this occasion, it is primarily because of the IPO. Search for that to return method down over the approaching quarters.
Wanting forward, Figma stays well-positioned for future development. The enterprise boasts a powerful 131% internet income retention charge. Meaning Figma’s prospects are spending considerably more cash as they use the platform.
There are at the moment 12,910 prospects spending no less than $10,000 in annual recurring income, and 1,262 prospects spending no less than $100,000. Excessive-end prospects are rising quicker (44% year-over-year development within the third quarter versus 32%), signaling that Figma is efficiently integrating itself into its prospects’ core enterprise actions.
This land-and-expand mannequin bodes properly for sturdy, long-term gross sales development, serving to Figma set up a aggressive moat at a time when AI poses a menace to corporations throughout the software program house.
Does investing in Figma include dangers? Completely. Adobe will undoubtedly strain Figma, and the corporate should proceed to execute. Income development has slowed considerably from earlier this yr, and traders will wish to look ahead to that to stabilize. If the income retention charge collapses, that is a critical purple flag.
However each inventory has dangers. The secret’s to take a position when the inventory worth adequately displays the dangers. Figma’s inventory worth collapsing the best way it has truly makes it a greater funding now. You may see how the price-to-sales ratio has come down drastically from its IPO time-frame.
At 19 occasions trailing-12-month income, the inventory is now inexpensive than a few of Wall Road’s hottest software program names, comparable to Palantir Applied sciences and CrowdStrike Holdings.
Figma may stay risky as a brand new development inventory in an unpredictable AI and software program panorama. Traders can dollar-cost common to keep away from leaping in at an inopportune time. That mentioned, numerous the recent air has been let loose of this IPO balloon, making its long-term upside as a number one next-generation software program firm value shopping for into right here.
Before you purchase inventory in Figma, take into account this:
The Motley Idiot Inventory Advisor analyst workforce simply recognized what they consider are the 10 finest shares for traders to purchase now… and Figma wasn’t one in all them. The ten shares that made the reduce may produce monster returns within the coming years.
Think about when Netflix made this checklist on December 17, 2004… in case you invested $1,000 on the time of our suggestion, you’d have $509,470!* Or when Nvidia made this checklist on April 15, 2005… in case you invested $1,000 on the time of our suggestion, you’d have $1,167,988!*
Now, it’s value noting Inventory Advisor’s complete common return is 991% — a market-crushing outperformance in comparison with 196% for the S&P 500. Do not miss the newest high 10 checklist, accessible with Inventory Advisor, and be part of an investing neighborhood constructed by particular person traders for particular person traders.
*Inventory Advisor returns as of December 22, 2025
Justin Pope has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Adobe, CrowdStrike, and Palantir Applied sciences. The Motley Idiot recommends Figma and recommends the next choices: lengthy January 2028 $330 calls on Adobe and brief January 2028 $340 calls on Adobe. The Motley Idiot has a disclosure coverage.
Brown Advisory, an funding administration firm, launched its “Brown Advisory Mid-Cap Development Technique” third-quarter 2025 investor letter. A replica of…
Macquarie Asset Administration, an funding administration firm, launched its “Macquarie Massive Cap Development Fund” investor letter for the third quarter…
