From: "Ens, Amanda" {a To: = E." — Ce — a: tti—(i‘isésSC*@ Subject: Buy FB puts before earnings Date: Thu, 13 Apr 2017 13:23:40 +0000 Attachments: 1Q_Internet.pdf Inline-Images: image003.jpg We generally view single stock implied vol as underpricing earnings this season. FB in particular screens cheap. Our research’s 1Q internet preview includes sentiment rankings, with FB ranked #1 out of 25 internet stocks with highest positive sentiment, driven by its lowest short interest as % of float, 2nd YTD stock performance. highest yoy revenue growth expectations, and 21% FB reports May 3d and we view 5May2017 puts as priced attractively low, given FB’s extremely high positive sentiment/long positioning and high rev expectations going into Q1 #’s. The SMay2017 ATM put costs 2.8% vs an avg 6% realized daily move over the past 6 earnings. Additionally, SMay2017 expiration captures the April 18th-19th F8 developer conference, an event that has historically been a catalyst for the stock. Buy FB SMay2017 ATM put for 2.8% premium FB vol screens as cheap across the curve; happy to price longer dates as well. Report link Sentiment Ranking Update We are updating our sentiment ranking index on 25 stocks in our Internet coverage universe (as of 4/4/17). We have aggregated six different indicators we think are relevant to gauge sentiment and have generated an overall "sentiment" score for each company. This sentiment analysis is intended to be informative and should not be used to form an investment opinion; for example our model does not factor in valuation or management quality. Of our company coverage universe, we have excluded four game publisher companies as well as two recent |PO's from this analysis as data may not be comparable. Table 6: 1Q16 change in sentiment ranking Ticker Rank Pre 4Q A Score PreéQ A FB 1 +3 a +4 WIX 2 1 o +2 TREE 3 1 8 1 AMZN 4 +5 8 +4 INFLX 5 2 9 A GOOGL 6 NA 9 oa PCLN 7 41 9 +2 CRCM 8 +9 11 +3 EXPE 9 +45 12 42 IAC 10 45 12 +2 RATE 11 4 13 2 EBAY 12 +4 13 +1 ONDK 13 +5 14 al 2G 4 4 14 4 YHOO 15 +6 14 +3 GPRO 16 +8 14 +5 EFTA00696479

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YELP 7 7 16 4 Ww 18 5 16 3 P 19 NA 16 NA GRUB 20 9 16 4 MTCH 21 al 17 +1 QUOT 22 -10 17 4 FIT rx} +2 19 +1 TRIP 24 1 20 2 TWIR 25 5 21 4 Source: BofA Merril Lynch Global Research, Bloomberg, as of 4/4/2017 Investor sentiment categories We assembled data that measures investor sentiment across six categories. These metrics include latest short interest (as a % of float), change in short interest as a % of float over the last 90 days, current stock performance over the last 90 days, current average sell side ratings, forward year EPS estimate revisions over last 90 days, and expected FY17 revenue growth. While there are no perfect indicators of average investor sentiment, we believe these metrics provide a helpful framework of investor sentiment in our sector. In our analysis, Facebook, WIX, and LendingTree had the highest sentiment in 1Q, while Fitbit, Trip and Twitter had the lowest sentiment. Care.com had the most improved ranking, moving up 9 points to 8‘, while Quotient had the biggest decline moving down 10 spots in our ranking to 22n4, Methodology Our methodology consisted of: 1) gathering financial data across six categories that we believe are relevant to measuring investor sentiment, 2) ranking companies on each attribute using a scale of 1 to 29, with 1 highest and 29 the lowest, and 3) ranking the companies based on the avg. score of the six metrics. Highest sentiment: FB, WIX, and TREE; Lowest: FIT, TRIP, and TWTR Based on our sentiment ranking index, Facebook, Wix, and LendingTree have top investor sentiment pre 1Q earnings. Facebook moved into first place from fourth due to the lowest short interest as % of float, second highest FY17 revenue growth, sixth highest sell side FY16 EPS estimate revisions, and third best stock performance in the last 90 days. Wix came in second place with top stock performance in the last 90 days, top expected FY17 revenue growth and second best sell-side FY16 EPS estimate revision, despite ranking ninth for current sell side ranking and seventh for short interest ratio. LendingTree placed third with best current sell side ranking and best change in short interest ratio. Fitbit had third worst investor sentiment with the worst stock performance in the last 90 days, the worst expected FY17 revenue growth and the second largest change in short interest in the period. TripAdvisor, had the second lowest sentiment with the third worst sell side ranking and fifth worst sell side EPS estimate revision. Twitter, our lowest sentiment stock pre 1Q earnings, had second to worst sell side ranking and expected FY17 revenue growth, along with third to worst sell side estimate revisions and was below average in all of our categories. Score Ranking vs. Investment Rating Our sentiment analysis is independent of our investment rating system, and our investment rating may or may not factor in positive or negative sentiment. This scorecard analysis includes only data currently up to the last 90 days, and our investment rating opinion takes into consideration potential stock price fluctuations, attractiveness for investment relative to other stocks within our Coverage Cluster, business model quality, and valuation. Please see our Fundamental Equity Rating Opinion Key at the end of the report for more details. Table 7: Combined Metric List Ashort . EPS = Expected Company Show Hicrest interest % of Performance rel ide Estimate FY17 Rev. float ys nking Revisions Growth FB 1% 0% 21% 47 4% 37% Wix 2% -1% 67% 44 62% 43% TREE 23% 20% 21% 5.0 4% w% AMZN 1% 0% 20% 48 -10% 21% NFLX 6% -1% 14% 41 15% 27% GOOGL 1% 0% 6% 47 0% 19% PCLN 3% 0% 20% 46 0% 16% CRCM 3% 0% 42% 35 28% 6% EXPE B% 2% 11% 46 -12% 14% IAC 1% 0% 12% 44 5% -1% EFTA00696480

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RATE 2% 0% 13% 4.2 2% 16% EBAY 2% 0% 14% 3.6 3% 5% ONDK 12% om 1% 33 M% W% 2G 11% 2% -9% 39 -26% 24% YHOO 6% 1% 19% 3.8 0% 2% GPRO B% 3% 4% 23 T4% 7% YELP 10% 0% -14% 37 -2% 25% Ww 3% 2% 1T% 39 22% 25% P W% 2% -T% 39 2% 17% GRUB 18% T% “11% 44 5% 31% MTCH 27% 5% 4% 42 1% 8% QUOT B% 0% 13% 48 56% 5% FIT 26% 4% 29% 34 NA -27% TRIP 16% 5% 12% 29 21% 11% TWIR 11% om 11% 25 55% 7% Souroa: BofA Merrill Lynch Global Research, Bloomberg, as of 4/4/2017 Table 8: Combined metric rankings Short A short . EPS Expected Company Interest % interest % Pegormance Sell Side estimate FYI7 Rev. Average float _of float ays 9 Revisions Growth FB 1 8 3 4 6 2 4 Wix 7 6 1 9 2 1 4 TREE 20 1 4 1 7 3 8 AMZN 4 9 5 2 18 10 8 NFLX 10 7 10 13 5 6 9 GOOGL 2 12 13 5 12 an) 9 PCLN 8 "1 6 7 10 14 9 CRCM 9 14 2 20 4 19 11 EXPE 12 5 12 6 19 15 12 IAC 3 10 “1 8 16 23 12 RATE 6 18 23 10 a 13 13 EBAY 5 13 9 19 14 20 13 ONDK 17 21 14 21 3 5 14 26 15 4 18 14 22 9 14 YHOO 11 18 7 7 11 2 14 GPRO 24 3 15 25 1 18 14 YELP 14 16 24 18 13 8 16 Ww 25 19 8 15 21 7 16 P 23 20 7 16 7 12 16 GRUB 19 25 20 12 15 4 16 MTCH 22 24 16 a 9 17 7 QuoT 13 7 22 3 24 21 7 FIT 21 2 25 22 NA vi) 19 TRIP 18 23 yal 23 20 16 20 TWIR 16 22 19 24 23 24 21 Souroa: BofA Merrill Lynch Global Research, Bloomberg, as of 4/4/2017 Amanda Ens Director Bank of America Merrill Lynch Merrill Lynch, Pierce, Fenner & Smith Incorporated One Bryant Park, Sth Floor, New York, NY 10036 Phone: i! Mobile: iT EFTA00696481

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