Equity Research Report on Verizon, Yelp, Zillow, Zynga with Price Objectives

assume $4.7/share in value for the core business based Verizon's pending acquisition value of $4.83bn less $300mn for potential revisions. Downside risks to our PO are: 1} Alibaba stock valuation declines, 2) Alibaba valuation discount is higher than expected, 3) Verizon's pending acquisition of Yahoo core assets is delayed/challenged, 4} valuation of Yahoo! Japan falls, and 5) valuation of Excalibur patent portfolio falls. Yelp (YELP) Our $43 price objective is based on 14x 2018E EV/EBITDA, slightly above online media comps, which we believe is warranted given the higher margin potential in the model. We believe our multiple balances premium growth vs peers with medium-term concerns on competition and limited GAAP profitability. We believe the slight premium valuation is sustainable if the company can continue to deliver 25% y/y topline growth with y/y margin improvement. Downside risks are Google and Facebook's ambitions to build a review ecosystem to tap into local ad spending, competition from a variety of online and offline locally focused advertising businesses, Google traffic dependency, and advertiser churn. Zillow (ZG / Z) Our $42 price objective is based on a 6x our 2018E EV/Sales and supported by our DCF valuation. Our multiple is roughly in-line for online real estate lead generation sites in other countries operating in developed countries. In addition, this multiple represents a relative discount given Zillow's higher sales growth and a larger US TAM in comparison to its peers in smaller developed markets like Australia and Japan. We are positive on Zillow's long term opportunity to capture the majority of realtor's dollars moving from offline channels to online marketing channels. Downside risks are: 1) traffic cannibalization between Zillow properties, 2) new lawsuits again Zillow, 3) potential for multiple compression, 4) a U.S. housing market down turn, and 5) lack of profitability support for valuation. Upside risks are: 1) faster than expected growth and S&M leverage, 2) Zillow Digg monetization, 3) accelerated grow the in rentals market, and 4) new market expansion. ZYNGA (ZNGA) Our $2.70 PO is now based on 11x 2018E EBITDA (which is a premium to the Mobile gaming peer group due to margin expansion potential), plus $1.41/share in cash and assets (building). Downside risks to our price objective are mobile market share losses, challenges in establishing successful new content given employee departures, and player churn due to greater competition given low barriers to entry. Upside risks are successful new title releases that accelerate growth, or potential acquisition of Zynga for its game portfolio. Analyst Certification We, Justin Post, Jason Mitchell and Nat Schindler, hereby certify that the views each of us has expressed in this research report accurately reflect each of our respective personal views about the subject securities and issuers. We also certify that no part of our respective compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report. Bankof America Merrill Lynch Internet/e-Commerce | 06 April2017 59 HOUSE_OVERSIGHT_014945