Figma (FIG 5.62%) went public last month, and many investors were eager to buy it right away. The company provides software for design and website creation. It's ideal for collaborating on projects. Back in 2022, Adobe (NASDAQ: ADBE) announced plans to acquire Figma for $20 billion, as it saw the business as a big part of its long-term growth. Regulatory hurdles, however, led to the deal being abandoned.

Now, anyone can invest in Figma. And after the first few days of trading, the stock looked to be in high demand, hitting a high of just under $143 on Aug. 1 after opening at $85 the previous day. But since then, the stock has been sliding, as investors appear to be growing worried about its rapidly rising valuation.

Are the concerns about Figma's valuation justified, or is the market simply taking a breather from a hot start? Here are the bullish and bearish cases for investing in Figma today.

Image source: Getty Images.

The bullish case for investing in Figma

One of the attractive features of Figma is that it offers relatively affordable plans. For professionals, plans that feature Figma's full suite of design products cost just $16 per month. With Adobe, just a subscription to Photoshop alone costs $23 per month. And for the full suite of Creative Cloud products, users can pay as much as $70 per month.

Figma may be appealing to users who don't need the advanced capabilities that come with Photoshop and other Adobe products. At a time when consumers are looking to cut costs, Figma's products can be attractive alternatives, especially since they make collaboration easy. Figma's business was enticing enough for Adobe to pursue it, but regulators in Europe saw the companies as potential competitors in the future, which is ultimately why the acquisition fell through.

The proof of Figma's popularity is evident in its strong growth. Last year, the company's revenue totaled $749 million, which was an increase of 48% year over year. And through the first three months of 2025, its sales totaled $228 million, representing a 46% increase.

The company currently has a net dollar retention rate of 132%, which means consumers are spending more with the business now than they did in the previous year. And a staggering 95% of Fortune 500 companies use Figma, with two-thirds of its users being non-designers, highlighting just how easy its software is to use.

The bearish cash for avoiding Figma

Figma's business is promising, but it also comes with risks. A big one is a lack of profitability. In each of the past two years, the company has reported an operating loss. And while this year, it has been doing well, through the first three months, its earnings per share (EPS) totaled just $0.04. That would translate into an annualized EPS of $0.16 -- putting it at a price-to-earnings multiple of close to 500, given a share price of around $80. Even with respect to sales, the stock is expensive, trading at a price-to-revenue multiple of around 50.

While the company has high gross margins, its operating expenses are also high. In the most recent quarter, they accounted for approximately three-quarters of Figma's top line. Without lower overhead and operating costs, it's going to be difficult for the company to generate much earnings growth.

When investors are paying such high multiples for a business, they are effectively paying a premium for future growth. The problem is that artificial intelligence is enhancing many design tools and, thus, can give users many more alternatives. Such alternatives may even be more advanced than Figma's. That can make it challenging for the company to continue to grow at a rate fast enough to justify its high valuation. Amid slowing growth, the stock's valuation could drop drastically.

Should you buy Figma stock today?

Figma may seem like the shiny new tech stock to own right now, but I wouldn't rush out to buy it. There's growing competition in the design space, and for users looking to cut costs, there are plenty of free options to consider (I've been a Gimp user for years), which is why I'm not sold on Figma's long-term growth potential. It's doing well right now, but that's while its numbers still aren't all that big.

Unless Figma's stock comes down significantly in price, I would steer clear of it.