Figma's Next Earnings Report on May 14 Could Send the Stock Soaring. Here's Why.

Figma (NYSE: FIG) hasn't even been publicly traded for a year, and it's already become an unfortunate poster child for the "SaaSpocalypse," or the collapse in software-as-a-service stocks in recent months.

Figma soared out of the gate on its IPO last July, but the stock is now down 83% from its peak immediately after it went public. The cloud-based design software company hasn't reported weak results. In fact, the company has continued to deliver strong growth as it invests in the business. Rather, the stock has plunged initially because of concerns about its valuation, and more recently, on the narrative that enterprise software will be disrupted by AI-native programs like those from Anthropic.

In fact, Figma plunged on April 17 when Anthropic launched Claude Design, a direct competitor to Figma, falling 7% that day.

Now, Figma is due to report first-quarter earnings on May 14, and it could mark a turning point for the stock. Here are a few reasons why Figma could soar on its next earnings report.

Image source: Motley Fool.

1. An opportunity to push back on the AI narrative

There's been a lot of pearl-clutching over the potential impact of AI on enterprise software, but the real-world evidence of disruption from publicly traded companies is thin thus far. While there is some anecdotal evidence of businesses replacing tools from companies like Salesforce for custom AI solutions, growth in the sector has remained robust.

Software also isn't a one-size-fits-all industry, and some companies will do better than others. Figma has already been preparing for the AI shift by launching its own AI-enabled tools and making acquisitions.

We haven't heard from management directly since the launch of Claude Design, and the earnings call will give CEO Dylan Field and the rest of the management team the opportunity to persuade investors that the company can grow despite the threat from Anthropic.

2. Software stocks may have bottomed out

Software stocks plunged sharply to start the year, but like the broader market, they've bounced back in recent weeks, despite signs that the market is still wary of the threat from Anthropic.

For example, the iShares Expanded Tech-Software ETF, which tracks the top cloud software stocks, is up more than 20% from its bottom a month ago, a sign that earlier fears in the market may have been overblown, especially after a number of software stocks have reported strong quarters this earnings season.

While valuations are still compressed, overall, the sector seems to be holding its own and that's good news for Figma.

3. A beat and raise is a good possibility

Figma's track record is short, but it has beaten revenue estimates in all three of its quarters as a publicly traded company.

After its first earnings report, the company is better able to control expectations with its revenue guidance, and there's good reason to expect a beat-and-raise quarter. Figma guided to 38% growth in the first quarter, but just 30% for the full year, implying that growth for the remaining three quarters would be just 27%, which seems to be an unlikely drop-off.

Meanwhile, the company is building momentum with new products like Figma Weave.

If the company does beat estimates and raise its guidance, the stock could soar, given its valuation. Figma isn't cheap exactly, trading at a trailing price-to-sales ratio of 10, but that's a good price for a fast-growing cloud stock. If it can show investors that the business is still sound, Figma stock could move a lot higher on Thursday.

Jeremy Bowman has positions in Figma. The Motley Fool has positions in and recommends Figma and Salesforce. The Motley Fool has a disclosure policy.