GFS
GLOBALFOUNDRIES Inc.
$85.64
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 88.5% above fair value
You pay
$85.64
Bear
$34.90
Fair
$45.42
Bull
$55.95
Bear
$34.90
-59.2%
$2.01 × 12x + net cash
Fair
$45.42
-47.0%
$2.01 × 16x + net cash
Bull
$55.95
-34.7%
$2.01 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.01)
Implied Market Multiple
42.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $77.45 from 19 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $45.42 per share.
Warnings
Price-to-book value of 4.5x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $77.45 (from 19 analysts). Our estimate is 55% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing