Why Figma Stock Jumped 11.9% Today
Key Points
About 42% of Figma's float was sold short heading into Monday's trading, setting the stage for a potential short squeeze.
This morning, Citizens Financial Group disclosed a new position of over 162,000 shares in Figma.
Despite today's gains, Figma still trades 84% below the $143 peak it hit on IPO day last summer.
Shares of Figma (NYSE: FIG) surged 11.9% as of 1:20 p.m. ET on Monday. There's no splashy headline to explain the move. Instead, the recovery from all-time lows smells like a short squeeze.
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The spark behind this surge
Heading into today, 42.4% of Figma's float was sold short. That's an enormous bet against the stock, among the most heavily shorted stocks in the technology sector. Figma's stock reached an all-time low of $16.60 per share on June 25 and has been recovering ever since. It looks like many bears rushed to cover their short-selling bets when Figma's stock held on to its recent gains.
The squeeze got a helping hand from a new SEC filing showing that Citizens Financial Group recently scooped up over 162,000 shares. When a major institution goes bargain-hunting on a stock the market has left for dead, it tends to spook the bears. Meanwhile, Bank of America and Citigroup analysts recently issued Buy ratings with price targets in the $30-$36 range, arguing that AI represents a tailwind for Figma rather than an existential threat.
What investors should consider
Even after today's double-digit jump and a 42% rebound from June's trough, Figma's stock still trades 84% below the $143 peak it reached on its IPO day last summer. Many investors fear that AI tools like Claude Design could replace Figma in digital design studios. That thesis hasn't materialized in the financials, though. Q1 revenue jumped 46% year over year, net dollar retention hit 139%, and management raised guidance.
The stock still trades at a forward P/E of 69, so Figma isn't a value play. However, the market seems to be warming to the idea that Figma can not only survive the AI trend but also benefit from it.
Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Figma. The Motley Fool has a disclosure policy.