Is FIGS Stock a High-Risk, High-Reward Bet in Q2 2025? A Contrarian's Dilemma

The stock market is a theater of contradictions, and FIGS, Inc. (NASDAQ: FIGS) is currently playing the role of a paradox. With a trailing P/E ratio of 617.00 and a forward P/E of 175.44, the company's valuation appears absurdly inflated. Yet, beneath the surface, FIGS is reporting accelerating revenue growth, a 39.6% projected annual earnings growth rate, and a strategic repositioning that hints at long-term differentiation. For contrarian value investors, the question is not whether FIGS is overvalued—it clearly is—but whether this overvaluation masks a mispriced opportunity.

The Valuation Paradox: Earnings Optimism vs. Price Skepticism

FIGS's financials tell a story of resilience. Q1 2025 revenue hit $124.9 million, a 5% year-over-year increase, with gross profit margins of 67.61% and a cash hoard of $251 million. Analysts project Q2 2025 EPS to jump 57% year-over-year to $0.016, and the company's 39.6% earnings growth rate dwarfs the S&P 500's 14.7% average. Yet, the stock trades at a P/E ratio that suggests investors are paying 175 times next year's earnings for a company that just posted a $0.00 EPS.

This disconnect is not lost on analysts. While Goldman Sachs downgraded to “Sell,” Morgan Stanley and Barclays remain cautiously optimistic, with price targets ranging from $4.50 to $5.00. The average target of $4.88 implies a 21.4% downside from the current price, yet the company's financial health score of “GOOD” (2.73) and debt-free balance sheet suggest it has the fortitude to weather volatility.

Strategic Repositioning: Innovation as a Moat

FIGS's 2025 strategy is a masterclass in contrarian thinking. The company is betting on three pillars: product innovation, international expansion, and B2B growth.

1. Product Innovation: The launch of FormX and Float fabric platforms is redefining healthcare apparel. These materials offer superior durability and comfort, driving a 2.6% year-over-year increase in average order value (AOV) to $119. For a company selling scrubs, this is a critical differentiator.
2. International Expansion: With 34 countries already in its portfolio, FIGS is targeting Japan and South Korea in 2025. Localized community hubs, like the Houston location near the Texas Medical Center, are proving effective in attracting new customers (40% of Houston hub visitors are new).
3. B2B Growth: The “Teams business” is gaining traction, with partnerships like VEG (a veterinary emergency group) and a dedicated sales team. This segment could become a recurring revenue stream, insulating the company from retail volatility.

These initiatives are not just incremental—they are structural. The company's new $251 million cash position allows it to reinvest in innovation while mitigating risks like tariffs and supply chain disruptions.

The Contrarian Case: Is This a Dislocated Value Buy?

For value investors, the key question is whether the market is overreacting to short-term challenges. FIGS's Q1 net loss of $102,000 and a beta of 1.34 (higher volatility than the market) suggest risks. However, the company's ability to exceed revenue expectations ($124.9 million vs. $119.12 million forecast) and its 7.2% adjusted EBITDA margin indicate operational strength.

The “Sell” analyst rating may reflect skepticism about sustaining 39.6% earnings growth. Yet, FIGS's strategic moves—like the FormX fabric rollout and international expansion—could create compounding effects. If the company can maintain its 5% revenue growth and improve margins (projected to reach 7.5–8.5% in 2025), the current P/E ratio might normalize by 2026.

Risks and Realities

No contrarian bet is without peril. FIGS faces:
- Valuation Overhang: A P/E of 175 is unsustainable unless earnings grow exponentially.
- Macro Risks: Tariffs, currency fluctuations, and healthcare sector headwinds could pressure margins.
- Execution Risk: Can the company scale its new distribution center and international hubs without operational hiccups?

The stock's 52-week range ($3.57–$7.05) and recent 8.91% after-hours drop post-earnings highlight its speculative nature.

Investment Thesis: A High-Risk, High-Reward Play

For the contrarian, FIGS is a classic “buy what the world is selling” scenario. The stock's steep discount to intrinsic value (based on cash reserves, growth projections, and brand strength) creates a margin of safety. However, this is not a buy-and-hold stock—it requires active monitoring of:
1. Q2 2025 Earnings: Will the company deliver on its $0.016 EPS forecast?
2. International Expansion: Can Japan and Korea replicate the success of Houston?
3. Product Adoption: Will FormX and Float drive AOV higher?

If FIGS executes its strategy, the current P/E ratio could compress to 30–40 by 2026, unlocking 70–100% upside. But if execution falters, the “Sell” rating could materialize.

Final Verdict

FIGS is a high-risk, high-reward bet. For investors with a 2–3 year horizon and a tolerance for volatility, it offers a compelling case of mispriced value. However, the steep P/E and macro risks mean this is not for the faint of heart.

Action Plan:
- Buy if Q2 2025 earnings exceed $0.016 and international expansion gains traction.
- Sell if the P/E ratio remains above 200 in 2026 or margins fail to improve.

In the words of a certain meme stock legend: “The market is always wrong when it's most certain. FIGS is a reminder that the best opportunities lie where the crowd is screaming 'sell.'”