From: "Ens, Amanda" <I

From: "Ens, Amanda" <I To: "jeffrey E." <[email protected]>, " Subject: Buy FB puts before earnings Date: Thu, 13 Apr 2017 13:23:40 +0000 Attachments: 1Q_Intemet.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 1Clinternet 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 highest yoy revenue growth expectations, and 21% 'TD stock performance. FB reports May 3rd, and we view 5May2017 puts as priced attractively low, given FB's extremely high positive sentiment/long positioning and high rev expectations going into O1 Ws. The 5May2017 ATM put costs 2.8% vs an avg 6% realized daily move over the past 6 earnings. Additionally, 5May2017 expiration captures the April 18th-19th F8 developer conference, an event that has historically been a catalyst for the stock. Buy FB 5May2017 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 IPO's from this analysis as data may not be comparable. Table 6:1Q16 change in sentiment anking Ticker Rank Pre 40 A Score PSC) A FB 1 43 4 +4 WIX 2 •1 4 +2 TREE 3 •1 8 -1 AAIZN 4 49 8 +4 NFLX 5 •2 9 -1 GOOGL 6 NA 9 +1 PCLN 7 +1 9 +2 CRCIA 8 +9 11 +3 EXPE 9 +5 12 +2 IAC 10 +5 12 +2 RATE 11 -4 13 -2 BAY 12 +4 13 +1 ONDK 13 +5 14 +1 ZG 14 •9 14 •5 YHOO 15 +6 14 +3 GPRO 16 +8 14 +5 EFTA00696479 YELP 17 .7 16 -4 w 18 .5 16 -3 P 19 NA 16 NA GRUB 20 .9 16 -4 MTCH 21 +1 17 +1 0U0T 22 -10 17 -4 FIT 23 +2 19 +1 TRP 24 -1 20 -2 TWTR 25 -5 21 -5 Source: 8c4A Merril Lynch Gaul ReseardxWooer°, as cl4/4/201? 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 8th, while Quotient had the biggest decline moving down 10 spots in our ranking to 22nd. 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 10 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 Company Short Interest A short interest % of Performance Sell Side EPS Estimate Expected FY17 Rev. '10 float float 90 days Ranking Revisions Growth FB 1% 0% 21% 4.7 4% 37% WIX 2% -1% 67% 4.4 62% 43% TREE 23% -20% 21% 5.0 .6% 34% AMZN 1% 0% 20% 4.8 -10% 21% NFLX 6% -1% 14% 4.1 15% 27% GOOGL 1% 0% 6% 4.7 0% 19% PUN 3% 0% 20% 4.6 0% 16% CRCM 3% 0% 42% 3.5 28% 6% EXPE 8% -2% 11% 4.6 -12% 14% LAC 1% 0% 12% 4.4 .5% .1% EFTA00696480 RATE 2% 0% -13% 4.2 2% 16% EBAY 2% 0% 14% 3.6 -3% 5% ONOK 12% 3% 1% 3.3 34% 3016 ZG 11% -2% -9% 3.9 -26% 24% YH00 6% 1% 19% 18 0% 2% GPRO 36% -3% -4% 2.3 74% 7% YELP 10% 0% -14% 3.7 -2% 25% W 38% 2% 17% 19 -22% 25% P 30% 2% -7% 3.9 2% 17% GRUB 18% 7% -11% 4.1 -5% 31% MTCH 27% 5% -4% 4.2 1% 8% OUOT 8% 0% -13% 4.8 -56% 5% FIT 26% -4% -29% 3.1 NA -27% TRIP 16% 5% -12% 2.9 -21% 11% TWTR 11% 3% -11% 2.5 -55% -7% Source: EMI/Merril Lynch Global Reward). Btoomberg. es oil/4120g Table 8: Combined metric rankings Company Short Interest % float a short interest % of float Performance 90 days Sell Side Ranking EPS Estimate Revisions Expected FY17 Rev. Growth Average FB t 8 3 4 6 2 4 WIX 7 6 1 9 2 1 4 TREE 20 1 4 I 17 3 8 AMZN 4 9 5 2 18 10 8 NFLX 10 7 10 13 5 6 9 GOOGL 2 12 13 5 12 11 9 PCLN 8 11 6 7 10 14 9 CRCM 9 14 2 20 4 19 fl EXPE 12 5 12 6 19 15 12 IAC 3 10 11 8 16 23 12 RATE 6 15 23 10 8 13 13 EBAY 5 13 9 19 14 20 13 ONDK 17 21 14 21 3 5 14 ZG 15 4 18 14 22 9 14 YH00 11 18 7 17 11 22 14 GPRO 24 3 15 25 1 18 14 YELP 14 16 24 18 13 8 16 W 25 19 8 15 21 7 16 P 23 20 17 16 7 12 16 GRUB 19 25 20 12 15 4 16 MTCH 22 24 16 11 9 17 17 QUOT 13 17 22 3 24 21 17 FIT 21 2 25 22 WA 25 19 TRIP 18 23 21 23 20 16 20 TWTR 16 22 19 24 23 24 21 Source: WAN'S Lyncb Global Research. Doomberg. es of 4412017 Amanda Ens Director Bank of America Merrill Lynch Merrill Lynch, Pierce, Fenner & Smith Incorporated One Bryant Park, 5th Floor, New York, NY 10036 Phone: Mobile: EFTA00696481 git,cid:Image003.jpg@O1D 27B0E.95197D80 This message, and any attachments, is for the intended recipient(s) only, may contain information that is privileged, confidential and/or proprietary and subject to important terms and conditions available at http://www.bankofamerica.com/emaildisclaimer. If you are not the intended recipient, please delete this message. EFTA00696482