Figma Valuation Criticized by Jim Cramer as Disconnected from Fundamentals

Jim Cramer criticizes Figma's valuation as detached from fundamentals, stating that the company's IPO price of $33 and its subsequent trading at $115 and change is unsustainable. Figma provides a collaborative design platform with tools for UI design, prototyping, team alignment, and developer handoff. Cramer believes that valuation matters and can impact one's bank account, especially for those who invested in the initial public offering.

In a recent series of posts on X, CNBC's Jim Cramer expressed concern over the valuation of Figma, an AI-based design tool firm that went public today. Figma's shares popped by 227% after its listing, making it one of the most expensive stocks on the market [1].

Figma operates a web platform that enables developers to leverage AI for creating user interfaces and saving development time. The firm's IPO priced at $33, but shares jumped to $115 and change, giving the company a market valuation of $50 billion [1]. Cramer believes this valuation is detached from the company's fundamentals, with the shares trading at 50 times its sales and a 53.5x revenue to value ratio [1].

Cramer pointed out that Figma's valuation makes it appear as if it is the second most expensive stock in the market, coming second only to data analytics firm Palantir, which trades at an astonishing 689x price-to-earnings ratio [1]. He believes that while investor bullishness is understandable, given the firm's customer list includes major tech companies and government agencies, the valuation is unsustainable [1].

Cramer also mentioned that Figma's growth rate, at 40% annual revenue growth, is too low to justify the skyrocketing share price. He admitted that people often get "too excited" and pay exhorbitant prices for shares, but Figma is still "way too expensive" [1]. He added that the valuation makes it appear as if the firm is the second most expensive stock in the market [1].

In a separate segment on CNBC's “Mad Money Lightning Round,” Cramer discussed other investment opportunities. He said no to Advance Auto Parts, Inc. (AAP) and Fortinet, Inc. (FTNT), but expressed interest in AutoZone, Inc. (AZO) and UGI Corporation (UGI) [2]. Cramer's views on these companies were based on recent news and earnings reports.

References:
[1] https://wccftech.com/jim-cramer-wants-you-to-hold-off-on-buying-figma-until-a-cheaper-valuation/
[2] https://www.benzinga.com/analyst-stock-ratings/analyst-color/25/07/46718035/cramer-says-no-to-this-auto-parts-provider-yes-another