Figma stock remains under pressure and is hovering near its record low as concerns about disruption from artificial intelligence (AI) continue to weigh on sentiment. The shares recently dropped to $18.90, just a little above the all-time low of $16.48, and they have now slumped by more than 86% from their peak. So, will the stock fall further or bounce back?
Figma stock has dropped amid AI concerns
Figma, a top company in the design industry, has come under pressure since going public, as investors remain concerned about the potential disruption from artificial intelligence (AI) tools, a situation now known as SaaSpocalypse.
Its sell-off has mirrored that of other companies in the software industry. ServiceNow has dropped by over 37% from its highest point in October, while Salesforce has fallen by 20% from its peak. Other top software companies like Workday and Adobe have also slipped.
On the positive side for Figma, its business has continued growing and defying expectations, a sign that demand for its products is strong. The most recent earnings report showed that its revenue jumped by 43% in the third quarter to $391 million, with its gross margin rising to 80%.
Most notably, the number of companies using its platform continues to grow such that the net dollar retention rate was 131%. Its paid customers spending over $10,000 has jumped to 15,566, while those paying over $100,000 rose to 1,117.
The company has also seen the number of customers using AI on its platform increasing in the past few quarters. In a statement, the company’s CEO said:
“AI is opening up new possibilities for how products get built, and we see incredible opportunity for Figma to shape what comes next. As code becomes abstracted, the products that are built will be defined by the judgment and the creativity of the humans behind them.”
Analysts see Figma’s growth continuing
Top analysts expect the company’s revenue to keep growing in the coming years despite the AI disruption. The average estimate among analysts is that its fourth-quarter revenue will be $403 million, representing a 33% annual increase.
In its earnings report, the company estimated that its revenue would be between $401 million and $404 million. As such, chances are that the company will release stronger-than-expected results, as it has always done since going public.
Analysts have a bullish outlook for the company, even as most of them slashed their outlook. Citigroup’s Tyler Radke has a target of $34, while JPMorgan has a target of $24. Royal Bank of Canada sees the stock rising modestly to $24, while Wells Fargo expects it to hit $30.
Figma share price technical analysis
The daily chart shows that the Figma stock has come under pressure in the past few weeks, moving from $31.3 on August 27 to $18.97. It has remained below the 50-day Exponential Moving Average (EMA).
The stock has formed a head-and-shoulders pattern, which is a common bearish reversal sign in technical analysis. Its neckline, in this case, is at $16.48. Therefore, there is a risk that the stock will continue falling, potentially to the support of $15.
In the long term, however, the stock seems to be in the accumulation stage, which often leads to a short squeeze. That is a possibility considering that the company has some solid fundamentals, including strong growth and a path towards profitability.