Figma in focus as Piper Sandler starts with Overweight rating

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Figma (NYSE:FIG [https://seekingalpha.com/symbol/FIG]) was in focus on Wednesday as investment firm Piper Sandler started coverage on the design software company with an Overweight rating and $85 price target.

Shares were fractionally higher in premarket trading.

“Preliminary ARR for Q2 is approaching $1B in a short span of 10 years,” Piper Sandler analyst Brent Bracelin wrote in a note to clients. “Despite strong growth, the company is still in the early stages of building an end-to-end platform optimized to turn ideas into digital products for companies of all sizes. Favorable secular tailwinds aided by new AI-powered solutions could help triple ARR to $3B+ and expand FCF to 30%+ by 2030E.”

Bracelin continued: “Given volatility across newly minted IPOs could remain elevated near term (i.e., FIG rose 250% on the first day but has now declined 21% in one week and sits 49% below the high), we advise large-cap growth investors to opportunistically add to positions.”

Figma went public late last month, and euphoria surrounding [https://seekingalpha.com/news/4475847-figma-erupts-in-ipo-launch-shares-more-than-triple-in-opening-moments] the event resulted in a brief valuation of the company at more than $50B.

Figma, which competes with companies like Adobe (ADBE [https://seekingalpha.com/symbol/ADBE]) and others, also has multiple growth levers that it can pull, Bracelin added. These include: new packaging and pricing (with the company having made changes in March that include a 20% to 33% full-seat price boost); freemium to paid conversions, as Figma has 25M monthly visitors and 13M active users; cross-selling of new products; and global expansion.

Lastly, the company appears to be in the “early innings” of unlocking the opportunity afforded by artificial intelligence. “Ambitious new products could result in a temporary margin drag but better position FIG for growth upside,” Bracelin explained.

MORE ON FIGMA

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* Figma's Growth Story Is Slowing, I'm Doubtful Of Its Prospects [https://seekingalpha.com/article/4813131-figma-growth-story-slowing-doubtful-of-its-prospects]
* Figma: The New Tech Titan In The Making [https://seekingalpha.com/article/4812516-figma-stock-new-tech-titan-in-making]
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* Figma stock slides 27% days after meteoric market debut [https://seekingalpha.com/news/4478118-figma-stock-slides]