Wednesday was a hard day for Fig (NYSE: FIG), Robinhood Markets (NASDAQ: HOOD) and Shopify (NASDAQ: SHOP) investors. The three growth stocks fell between 6% and 9%, disappointing investors as recent weakness intensifies for the market’s one-time darlings.
As the market sells, Cathie Wood buys. Co-Founder CEO of Ark Invest and its Chief Investment Officer. She spent Wednesday adding to existing Ark Invest positions in all three stocks. Figma, Robinhood and Shopify are now down 84%, 35% and 49% respectively from their recent highs. Let’s take a closer look.
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It’s been a rocky ride for investors since Figma went public last summer. It hit the market at $33, only to trade as high as $142.92 early in its trading history. It’s a broken IPO today.
Figma provides its growing user base with an AI-based platform that simplifies the design process for websites, apps and other digital products. As market cuts continue for software companies that could be upended by the AI revolution, Figma should be leading the charge rather than taking the hit.
That’s not to say that Figma hasn’t earned at least some of its downsides. Despite roughly ticking the “beat and raise” box in its first two quarters on the market, business is slowing. It has another big test next week when it reports its fourth-quarter results. It’s not a good sign to see stocks pull back ahead of this critical financial update.
If there’s one clear reason in next Wednesday’s financial report, it’s that even good news can send shares higher, after Figma shares are down 84% from their August peak. Don’t assume it will be an easy recovery. Just because the ceiling is high doesn’t mean the floor is close.
Revenue growth has only slowed since Figma went public last year.
Q1 2025: Up 46%
Q2 2025: Up 41%
Q3 2025: Up 38%
Guidance it issued in November called for a 35% top-line increase in next week’s fourth-quarter performance update. All of this will follow the 48% growth it posted for all of 2024. That’s a big worry for investors in IPO stocks, who fear they’re buying into a company at its peak, leaving better days behind.
It’s not all bad news for Figma. Its biggest customers are becoming even more engaged on the platform. Figma’s net dollar retention rate for customers generating at least $10,000 in annual turnover was 131%. In other words, its top customers are spending 31% more on Figma than a year ago. This net dollar retention rate is also a step up from the 129% it posted in the second quarter.
Figma has more than 13 million users, with 12,910 paid accounts on track to spend at least $10,000 each in the next year. Figma makes it easy to design effective digital offers. The market does not keep such success stories as broken IPOs for long.
Figma may have taken a hit ahead of the upcoming financial update, but Robinhood’s 9% drop on Wednesday was largely due to mixed real-world fourth-quarter results announced after the market closed on Tuesday. The online trading platform’s revenue rose 27 percent to $1.28 billion, but that was below analysts’ forecasts. He beat the bottom line by a narrow margin, but even that could earn an asterisk.
At least five analysts cut their price targets on the stock on Wednesday, including one who called earnings a miss if you normalize for the quarter’s unexpectedly low tax rate. Robinhood also expressed some concerns about its capital spending guidance for next year.
Cryptocurrency and options trading accounts for the bulk of its transaction-based revenue. There has been a slowdown on both fronts as the crypto winter continues to cool interest in digital currencies. Equity trading activity also fell. Robinhood is doing better with its emerging predictive markets offerings, but that growth may not be able to overcome a continued slowdown elsewhere.
Like Robinhood, Shopify shares fell on Wednesday after it failed to please investors with its quarterly results. The online marketplace operator posted a 31% rise in fourth-quarter revenue, lifting full-year results 30% higher. That’s a step up from the 26% growth it posted for all of 2024 and its strongest top-line growth since 2021. Shopify’s 19% free cash flow margin for the quarter extends a streak of double-digit free cash flow margins to 10 quarters. Yes, a two-digit series for a strong two-digit margin value.
Shares of Shopify initially rose on the report, but will close 6% lower by the closing bell on Wednesday. At least four analysts reportedly cut their price targets during the day. One called it a “beat and mixed” performance. Another Wall Street professional blamed valuation compression on tech platforms for the dovish attitude.
When an act stumbles after a seemingly strong performance, Cathie Wood becomes interested. She was a shopper on Wednesday.
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Rick Munarriz has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Figma and Shopify. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
