EA
Electronic Arts Inc.
$200.97
Platform & Compounding FCF
75%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 43.2% above fair value
You pay
$200.97
Bear
$118.86
Fair
$140.34
Bull
$159.33
Bear
$118.86
-40.9%
4% stage 1 growth, 11% discount
Fair
$140.34
-30.2%
6% stage 1 growth, 11% discount
Bull
$159.33
-20.7%
8% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (6% base case)
Terminal Value % of EV
35%
Implied Market Multiple
26.7x
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $172.65 from 66 analysts, using a 35% weight on analyst consensus. That produces an estimated intrinsic value of $140.34 per share.
Warnings
Stock-based employee pay equals 74% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $172.65 (from 66 analysts). Our estimate is 29% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions