Figma shares collapsed after initial ratings. Analysts pointed to the restrained potential
Most analysts refrained from recommending buying shares of the company, which recently debuted on the stock exchange
Shares of collaborative design software developer Figma collapsed after several leading Wall Street brokers began covering the securities with neutral ratings. Analysts cite the company's high valuation and increasing competition, though they also note its prospects in artificial intelligence.
Details
Figma shares were down 7.5% in early trading on Aug. 25 after neutral estimates from several major Wall Street analysts.
Morgan Stanley, Goldman Sachs, J.P. Morgan, Wolfe Research, RBC Capital Markets, Wells Fargo and William Blair are among those who started coverage of the company, Reuters writes. Most analysts gave the equivalent of a "hold" recommendation. Analysts cite the company's high valuation, stiff competition and growth prospects from AI,.
Figma debuted on the New York Stock Exchange in July. On the first day of trading, its shares soared 250% to over $115 against an IPO price of $33.
What the analysts are saying
- Morgan Stanley assigned a neutral rating and target price of $80, which implies growth of quotations by only 3.5%.
"We believe Figma is the market leader, but its current valuation already takes into account long-term growth. This limits the potential in the short term," the analysts noted.
- Goldman Sachs assigned a neutral rating and a target price of $48, predicting a 38% drop in the stock price.
- J.P. Morgan initiated coverage with a neutral rating and a $65 target price, down 16% from the closing price on Aug. 22.
- RBC Capital also assigned a neutral rating and a target price of $75, implying a 3% decline. The analysts noted: "While investors may be wary of AI becoming a competitor to Figma, we see it as a growth driver."
- Wells Fargo gave a neutral rating and a target price of $82, forecasting a 6% upside.
- Wolfe Research also limited to a neutral rating with no targeting, while William Blair initiated coverage with an Outperform ("buy") recommendation.
Context
Figma's market capitalization reached $37.7 billion at the end of recent trading - that's almost double the amount Adobe offered for the company in a failed deal in 2023, Reuters notes.
Figma produces collaborative design software used by Netflix, Airbnb and Duolingo. In its IPO prospectus, Figma cited fierce competition and risks of losing market share, especially with the rapid adoption of artificial intelligence technologies.
This article was AI-translated and verified by a human editor
