Bargain Hunting in Volatile Markets: 2 Undervalued Growth Stocks with Long-Term Potential

In an era of macroeconomic uncertainty, value investors are increasingly turning to growth stocks that combine strong fundamentals with transformative innovation. Two names that stand out in this category are Figma and Upstart, both of which have demonstrated resilience and AI-driven growth potential despite recent market volatility. While their valuations remain contentious, a closer look at their financials, strategic initiatives, and competitive positioning suggests they are compelling long-term buys for investors willing to look beyond short-term noise.

Figma: Designing the Future of Collaboration

Figma (FIG) has emerged as a leader in the design software space, leveraging artificial intelligence to redefine user workflows. For the second quarter of 2025, the company reported revenue of $249.6 million, a 41% year-over-year increase, driven by the launch of AI-powered tools like Figma Make and Figma Sites. These innovations have not only expanded the platform's functionality but also deepened customer engagement, as evidenced by a 129% net dollar retention rate for customers with annual recurring revenue (ARR) exceeding $10,000.

The company's strategic integration with OpenAI's ChatGPT further underscores its commitment to AI-driven growth, potentially broadening its appeal to developers and designers. Despite these strengths, Figma's share price has fallen over 60% since its July 2025 IPO, creating a valuation disconnect. While its Price/Sales ratio of 17.29X remains above the technology sector average of 7.23X, this premium reflects investor optimism about its long-term potential rather than near-term profitability.

Critics point to a $1.1 billion net loss in Q3 2025, largely due to one-time stock-based compensation expenses, but this should be viewed in the context of Figma's aggressive R&D investments. The company has raised its full-year revenue forecast to $1.044–1.046 billion, signaling confidence in its ability to scale. Competitors like Adobe and Atlassian are also integrating AI into their platforms, but Figma's design-centric focus and expanding product portfolio give it a unique edge in a market where collaboration tools are increasingly essential.

Upstart: Automating the Future of Lending

Upstart's transformation from a loss-making fintech startup to a profit-generating AI-driven lender is a testament to the power of strategic innovation. In Q3 2025, the company reported $277 million in revenue, a 71% year-over-year increase, alongside a $2.9 billion in loan originations, up 80% YoY. More impressively, it turned a GAAP net profit of $31.8 million, reversing a $6.8 million loss in the same period in 2024.

Upstart's AI platform has been central to this turnaround, enabling it to adapt to macroeconomic shifts while maintaining a 91% automation rate in loan approvals. The company's 57% contribution profit margin and a $71.2 million in adjusted EBITDA highlight its operational efficiency. However, its P/S ratio of 5.17X-well above the consumer finance industry average of 1.37X-has sparked debate about whether it is overvalued.

A narrative-based analysis, however, suggests otherwise. Analysts project a fair value of $55.38 per share, factoring in Upstart's expanding partnerships, improved underwriting, and foray into auto and home loans. While risks such as high delinquency rates and macroeconomic volatility persist, the company's guidance for $1.035 billion in full-year revenue and a $50 million in GAAP net income indicates a disciplined approach to growth. For investors, the key question is whether Upstart can sustain its AI-driven efficiency in a tightening credit environment-a challenge it has already navigated with relative success.

Strategic Value in a Correction-Driven Market

Both Figma and Upstart exemplify the principles of strategic value investing: they combine strong revenue growth with innovative AI applications and attractive post-correction valuations. Figma's premium P/S ratio reflects its leadership in a high-growth sector, while Upstart's profitability and margin expansion suggest it is undervalued relative to its long-term potential.

For Figma, the challenge lies in converting its design-centric AI tools into sustained profitability. For Upstart, the risk is macroeconomic, but its automation-driven model is well-suited to navigate cycles. In both cases, the companies are addressing structural shifts in their industries-design collaboration and digital lending-where AI is not a fad but a fundamental transformation.

In volatile markets, the key is to distinguish between temporary setbacks and enduring value. Figma and Upstart offer the latter, provided investors are willing to look beyond near-term volatility and focus on the long-term trajectory of AI-driven innovation.