Figma draws 'neutral' ratings as Wall Street flags lofty valuation, rising competition

Wall Street brokerages on Monday started their coverage of Figma with neutral ratings, as they weighed the design software maker's lofty valuation amid stiff competition against its potential for artificial intelligence-driven growth.

Figma made a stellar debut on the New York Stock Exchange last month, with its share price more than doubling to $85 from its IPO price of $33.

The strong debut paved the way for high-profile tech listings as deal activity rebounded from tariff-driven volatility.


As the industry-mandated quiet period ended on Monday, J.P. Morgan, RBC Capital Markets and Morgan Stanley initiated coverage with the equivalent of 'hold' ratings. Shares of the company were down nearly 1% at $76.64 in premarket trading.

"We view Figma as a market-leading platform, but valuation at a market-leading multiple is pricing a long runway for growth, limiting the near-term risk/reward and leaving us on the sidelines," Morgan Stanley analysts said as they initiated coverage with an 'equal-weight' rating.

The company's market value of $37.68 billion as of last close now far exceeds the $20 billion price tag from a now-abandoned buyout deal with industry giant Adobe in December 2023.

Figma makes collaborative design software used to build websites, apps and digital products. Its customers include streaming major Netflix, travel firm Airbnb and language learning app Duolingo.

In its IPO filing, Figma had flagged intense competition, particularly from rapid AI adoption, as a potential headwind, warning it could cede market share.

Design software firms have been aggressively working towards integrating generative AI tools that automate tasks to enhance efficiency of workflows and cut costs.

"While investors may have concerns that AI may simplify application design/development, therefore competing with Figma, we believe AI could be a real tailwind for Figma," RBC analysts noted.

Last week, Piper Sandler began coverage on Figma with an 'overweight' stance.

Morgan Stanley, Goldman Sachs, Allen & Co and J.P. Morgan were the lead underwriters of Figma's IPO. The company's prominent backers include venture capital firms Kleiner Perkins and Sequoia.

Below are brokerage ratings and price targets on Figma:

• J.P.Morgan: Neutral, $65
• RBC Capital Markets: Sector Perform, $75
• Morgan Stanley: Equal-weight, $80
• Piper Sandler: Overweight, $85