Wall Street Just Cut Figma's Price Target. History Says That's the Time to Buy.

Investment firm Goldman Sachs recently cut the price target on Figma (NYSE: FIG) to $30 per share, down from $35. In a sense, this should not come as a surprise, as the stock declined soon after its initial public offering (IPO) in July of last year and has traded in a range since March.

Nonetheless, investors should also remember that the software-as-a-service (SaaS) stock has fallen 80% since topping $120 shortly after the company went public. Instead of signaling further pain, history shows such actions sometimes signify a bottom following a sustained decline. That may be the case with Figma stock, signifying a buying opportunity that could become lucrative for investors.

Image source: Getty Images.

Putting the Figma price target cuts into perspective

Figma has stood out for creating a design tool for interactive website and app design. It successfully combined artificial intelligence (AI) and human interaction into this process, making it so valuable that Adobe once attempted to buy the company.

That momentum helped make its IPO initially successful, though as mentioned before, the stock has sold off amid its high valuation and fears of competition from AI. That downtrend could have played a role in a series of price target cuts by Goldman Sachs, which originally set a $48-per-share price target on the stock during last summer's IPO.

As strange as it may sound, this could signal beaten-down Figma stock has become a buy. Goldman Sachs target represents potential upside of more than 25%.

Additionally, price target cuts for Apple in 2019 and Netflix in 2022 preceded rapidly rising stock prices in the months after the stocks experienced significant declines. In Apple's case, the rapid growth of its services business and optimism regarding 5G helped rescue the stock after price target cuts based on weakening device sales. With Netflix (which also included downgrades), a valuation below 20 times earnings eased investor worries after subscriber numbers fell.

Figma's current conditions show parallels to both of those stocks. In the first quarter of 2026, the 46% year-over-year increase in revenue implies growth is not currently a challenge. While it is not yet profitable, it also reported free cash flow of $89 million for the quarter.

Furthermore, Figma now trades at a price-to-sales (P/S) ratio of around 10. This is down from its 66 sales multiple just after its IPO and is closer to the P/S ratios of other rapidly growing companies. Thus, instead of selling, now might be a time to take another look at Figma stock.

Investing in Figma stock after the price target cut

Ultimately, Figma appears to have experienced a "bullish price target cut."

Admittedly, bulls do not like to witness falling price targets, and negative sentiment tends to beget more selling.

However, its current price target would still amount to significant growth, and downgrades aren't always followed by falling stock prices. In my view, the historical indicators imply that the sell-off in Figma stock could soon come to an end.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, Apple, Figma, Goldman Sachs Group, and Netflix. The Motley Fool recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.