Jim Cramer Calls Out Figma Valuation as Detached From Fundamentals

Figma, Inc. (NYSE:FIG) is one of the stocks that Jim Cramer spoke about. Jim Cramer blamed the company for the market going down, as he remarked:

“Valuation matters. Sure, you can pay whatever you want for a stock. You, it’s personally you. You don’t have to tell anybody, but the price you pay does ultimately matter to your bank account, especially if you’re one of the people who got in on the initial public offering of Figma, the digital design company, which priced its IPO at $33 today. Then saw it open for trading at $85 and finished the day at $115 and change. Did you take some off? Did you ring the register, or did you just let it ride?

Somehow, Figma captured the zeitgeist of the entire joint, no, the entire market… And do you know why that happened? Was it the Fed? Was it the president? Was it earnings? No, it happened because of Figma. This market went down because of Figma. Why? Because valuation matters. What matters to this market is to be reasonable, and we weren’t today. Today was dominated by euphoria. And guess what? Euphoria is bad for business…

Now, I’m not disparaging Figma here. This is not some profitless company. It makes money, it grows fast, consistently. I like the product, used by everybody… But there’s a problem here, problem with Figma stock. The price made no sense whatsoever. It’s wildly inflated because it doesn’t make that much money. In fact, it makes so little that I can’t even use a price-to-earnings multiple that I used for Microsoft and Meta.

Valuation is irrelevant when we talk about Figma, irrelevant. How do we value it then? There’s really only one way. You have to judge it on a price-to-sales basis… The Figma deal mattered even more than the two giants because it’s the worst possible sign of froth. I hate it… What goes up must come down, okay?”

Image by Sergei Tokmakov, Esq. from Pixabay

Figma (NYSE:FIG) provides a collaborative design platform with tools for UI design, prototyping, team alignment, and developer handoff. The company’s offerings include features for presentations, brand assets, AI-driven prototyping, and website publishing.

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Disclosure: None. This article is originally published at Insider Monkey.