Jim Cramer Hesitant to Recommend Figma Due to High Valuation and AI Concerns.

Jim Cramer is hesitant to recommend Figma's stock due to its high valuation and potential negative impact from new AI technology on profitability. Although he likes the company's underlying business, he believes the stock may become too expensive if it roars out of the gate. Cramer notes that Figma's software is used by prominent clients and has strong financials, but enterprise software companies have seen weakness recently, especially those that make tools for other software developers.

Figma, a collaborative design platform, is set to go public with an anticipated valuation of $13.6 billion to $16.5 billion [1]. The company, known for its web-based design tools and recent integration of AI features, has seen significant growth, with 13 million unique monthly users and a presence in 95% of Fortune 500 companies [1]. Figma's IPO is expected to raise $1 billion and list shares at $25 to $28, giving it a valuation of $13.6 billion at the high end [1].

Jim Cramer, a prominent financial analyst, has expressed caution regarding Figma's stock. While he acknowledges the company's strong business fundamentals and widespread adoption, he is concerned about the high valuation and potential impact of new AI technology on profitability. Cramer notes that enterprise software companies, particularly those targeting other software developers, have faced recent challenges [1].

Figma's financial performance has been mixed. In 2023, the company reported $737.8 million in net income on revenue of $504.9 million, but this included a $1 billion termination fee after Adobe's failed acquisition [1]. In 2024, revenue grew to $749.0 million, but the company reported a loss of $732.1 million, with operating expenses nearly tripling [1]. However, Figma has shown signs of profitability in the first two quarters of 2025, generating net income of $44.9 million on revenue of $228.2 million [1].

Despite these financial fluctuations, Figma's balance sheet remains strong, with $330 million in debt and $1.56 billion in cash, cash equivalents, and marketable securities [1]. The company's potential to integrate more AI tools into its platform, anticipating 1 billion new apps by 2028, suggests significant growth opportunities [1].

Cramer's concern about Figma's valuation aligns with Barron's estimates, which suggest the company could be overvalued on a price-to-sales and price-to-earnings basis [1]. However, given the strong revenue growth and signs of profitability, along with the current environment in the AI sector, Figma's valuation may not be entirely unreasonable [1]. Investors should be aware that high demand for Figma's offering could lead to rapid price increases, potentially making the stock overvalued by the time retail investors can participate [1].

References:
[1] https://finance.yahoo.com/news/figma-ipo-coming-justify-valuation-150000601.html