Figma Stock Rises After Record IPO Surge. Cathie Wood Bought in, There’s a Hurdle for Others.

Figma posted revenue of $749 million last year. (Courtesy Figma)

Figma stock was climbing again early Friday after a big surge on its stock market debut.

There still looks to be plenty of pent-up demand for the design-software company but it will require accepting an eyebrow-raising valuation.

Figma shares were trading at $120.37 in early trading, up 4% from their close of $115.50 the previous day.

The stock more than tripled following an initial public offering on Thursday priced at $33 a share—marking the biggest ever first-day rise for an IPO, which raised more than $500 million according to Renaissance Capital.

So what comes next for the stock? There isn’t much Wall Street coverage yet, with analysts typically waiting 25 calendar days after an IPO before initiating coverage.

Before the offering, analysts were positive about the company’s prospects as it battles with Adobe and privately held Canva for the design software market, which is set to be transformed by the use of artificial intelligence.

“With new capital and a widely used product, [Figma] can now expand further into AI tools and developer software. While future execution and broader adoption will be key, it enters the public market with a strong record and clear growth potential,” D.A. Davison analyst Gil Luria wrote in a report ahead of the IPO.

However, its valuation could pose a challenge. Figma posted revenue of $749 million last year, according to regulatory filings. Early Friday its market value stood at around $70.4 billion—giving it a price-to-sales ratio of around 94 times. By comparison, Adobe has a price-to-sales ratio just short of 11 times.

The counterpoint is Figma’s pace of growth—its revenue rose 48% in 2024, a rate it broadly sustained in the first quarter of this year. Adobe reported 11% growth in its most recent fiscal year.

Figma is likely to require shareholders who prefer aggressive growth. One such supporter is ARK Invest CEO Cathie Wood, who picked up 60,000 Figma shares for her ARK Next Generation Internet ETF, according to a report of the fund’s holdings on Friday.

Investors will have to decide if they’re comfortable following Wood’s example.

Write to Adam Clark at adam.clark@barrons.com