EA
Electronic Arts Inc.
$209.70
Platform & Compounding FCF
50%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 70.2% above fair value
You pay
$209.70
Bear
$104.12
Fair
$123.22
Bull
$140.10
Bear
$104.12
-50.3%
4% stage 1 growth, 11% discount
Fair
$123.22
-41.2%
6% stage 1 growth, 11% discount
Bull
$140.10
-33.2%
8% stage 1 growth, 11% discount
Adjust Assumptions
6.0%
11.0%
3.0%
Key Value Driver
FCF growth rate (6% base case)
Terminal Value % of EV
35%
Implied Market Multiple
27.7x
Market is pricing in (growth)
13.3%
vs 6.0% base
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (66 analysts)
$172.65
Divergence from AlphaVal
29%
Summary
Using a two-stage FCF DCF with 6% growth decelerating over 15 years, discounted at 11%, the base-case intrinsic value is $123.22 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