Stifel Internet Research Overview

Stifel does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
All relevant disclosures and certifications appear on pages 61-64 of this report.
Prices are as of the close on November 11, 2016
November 2016
eCommerce &
Marketplaces
Online Travel
Digital Media
& Advertising
Scott Devitt swdevitt@stifel.com
John Egbert egbertj@stifel.com
Lamont Williams, CFA williamsl@stifel.com
Ansel Parikh parikha@stifel.com
Logan Thomas thomasl@stifel.com
Internet Overview & Research
Financial
Technology

1
Table of Contents
• Internet Investing Framework
• Sector Analysis
• Top Picks Summary
• Company Summaries
• Price Target Methodology and Risks
• Comparables
3-6
7-13
14-16
17-43
44-49
50-60

2
In Defense of the Internet
We believe the companies that use the Internet to create unique consumer experiences while treating consumers with respect, win over
the long-term. We just experienced a change in the political administration, which has led to a sell-off in Consumer Internet stocks due to
a perception that the Internet may be on the wrong side of political change in areas including competition / net neutrality, among others.
At this point, nobody likely knows what will happen but we believe a focus on secular growth, market share gains, and competitive
position, will likely continue to lead to outperformance. We envision a future in which Internet companies continue to win despite the
possible intermediate-term headwind of less favorable policy. For the time being, the market has increased the discount rate on
Consumer Internet, a reasonable initial response, but one that has likely created opportunity for long-term investors. While uncertainty
may sustain for some time, this Internet Overview presentation aims to assist investors that may like to position for the ultimate return to
a focus on company fundamentals.
We utilize an investment framework that we have found to be a success indicator for Consumer Internet stocks. The framework consists
of a list of attributes that have led to long-term success in the sector. We use the framework as one component of our process for
identifying long-term winners in the sector. The framework leads us to recommend companies with proven track records (blue chips), as
well as those that we believe have the potential to be future blue chips.
In the blue chip category, we maintain Buy ratings on Alibaba, Alphabet, Amazon, Facebook, Netflix, PayPal, and Priceline. In the
emerging company segment, we maintain Buy ratings on GrubHub, Pandora, and Square. We maintain Sell ratings on TripAdvisor and
Twitter.
As it relates to net neutrality and Netflix, we note that Netflix has invested in its own content delivery network and has materially reduced
the bandwidth that its content utilizes due to compression technology. As it relates to net neutrality and fairness, we note that our most
recent bill for TV, Internet, and wireless service for a family of five for one month was $654.37 with no overage charges. Let’s talk fair.
The new administration could lead to a repatriation event. Internet international cash balances include – GOOGL $50B, PCLN $12B,
EBAY $8B, AMZN $6B, PYPL $5B, FB $4B, and EXPE $1B. As an international growth headwind, we will monitor sustained US $
strength.

3
Internet Investing Framework

4
Stifel Internet Investment Framework
Our framework includes 12 company attributes / characteristics that we have found to drive differentiation in Internet franchises over long
periods of time. We think investors should focus on companies with large, global market opportunities relative to current market
capitalization and those that have the appropriate business model in place to solve consumer problems.
 Well-defined and large market opportunity relative to current market capitalization
 Global opportunity
 Scale-advantaged, winner-takes-most market
 Business category solves a consumer problem
 Company has appropriate business model to solve the problem
 Founder-led and / or unique corporate culture
 Capable and proven management team
 Focused solely on long-term outcomes
 Technology-centric model
 Large profit pools
 Valuation / capital allocation / employee share grant dilution
 Strategic asset

5
Stifel Internet Coverage – Scott Devitt
Source: Company reports, Stifel estimates, Factset
eCommerce &
Marketplaces
Digital Media
& Advertising
Online Travel
Financial
Technology
FX Assumptions
EUR/USD GBP/USD USD/JPY USD/KRW USD/HKD USD/CNY USD/BRL USD/ZAR
$1.09 $1.26 ¥106.60 ₩1,164.90 HKD7.76 ¥6.82 R$3.49 R14.35
Price Market Enterprise
11/11/2016 Cap (B) Value (B)
Alibaba Group BABA Devitt Buy $120 $92.99 $238.0 $229.1
Amazon.com, Inc. AMZN Devitt Buy $888 $739.01 $363.7 $355.2
Care.com, Inc. CRCM Devitt Hold $10 $8.83 $0.3 $0.2
eBay Inc. EBAY Devitt Hold $31 $28.64 $33.4 $30.4
MercadoLibre, Inc. MELI Devitt Hold $185 $155.96 $6.9 $6.7
RetailMeNot, Inc. SALE Devitt Hold $9 $9.40 $0.5 $0.3
Wayfair, Inc. W Devitt Hold $35 $35.71 $3.3 $2.9
Zalando SE ZAL-DE Devitt Hold € 37 € 35.50 € 9.3 € 8.3
PayPal PYPL Devitt Buy $49 $40.08 $49.9 $43.5
Square, Inc. SQ Devitt Buy $15 $11.88 $4.8 $4.4
LendingClub LC Devitt Hold $7 $6.14 $2.6 $1.8
Alphabet Inc. GOOGL Devitt Buy $950 $771.75 $550.5 $471.4
Facebook, Inc. FB Devitt Buy $155 $119.02 $355.8 $329.7
Netflix, Inc. NFLX Devitt Buy $140 $114.78 $51.1 $52.7
Twitter, Inc. TWTR Devitt Sell $10 $18.55 $14.3 $12.2
LinkedIn Corporation LNKD Devitt Hold $196 $191.44 $27.3 $25.1
Priceline Group PCLN Devitt Buy $1,900 $1,540.65 $78.2 $71.9
TripAdvisor, Inc. TRIP Devitt Sell $47 $51.01 $7.5 $6.8
Expedia, Inc. EXPE Devitt Hold $130 $121.20 $19.2 $20.5
Company Name Ticker
Primary
Coverage
Rating Target

6
Stifel Internet Coverage – John Egbert
Source: Company reports, Stifel estimates, Factset
Small &
Medium Cap
Internet
Price Market Enterprise
11/11/2016 Cap (B) Value (B)
GrubHub, Inc. GRUB Egbert Buy $46 $35.31 $3.1 $2.8
Pandora Media, Inc. P Egbert Buy $15 $10.96 $2.7 $2.8
Criteo SA CRTO Egbert Hold $41 $40.02 $2.8 $2.4
GoDaddy, Inc. GDDY Egbert Hold $33 $33.14 $6.3 $6.8
Yelp Inc. YELP Egbert Hold $42 $36.29 $3.0 $2.6
Company Name Ticker
Primary
Coverage
Rating Target

33%
17%
4%
5%
18%
12% 11%
30%
14%
19%
5%
12% 11%
9%
0%
5%
10%
15%
20%
25%
30%
35%
TV Desktop
Internet
Mobile
Internet
Radio Print Direct Mail Outdoor /
Other
2014 2015 2016E 2017E 2018E 2019E 2020E
0
$50B
$100B
$150B
$200B
$250B
$300B
$350B
2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Alphabet (Gross Revenue) Facebook (Net Revenue)
Other Stifel Internet Companies Other Public Advertising Companies
Emerging Companies Rest of Online Ad Market
%
61%
Alphabet/Facebook Online Ad Dollar Share
64
40% 43% 45% 46%
48%
51%
56%
58%
60%
61%
37%
76
297
267
239
212
188
166
146
125
107
93
32
229
204
179
156
133
111
93
75
63
52
40
% Rest of Online Ad Market Dollar Share 23%
24%
25%
27%
29%
33%
8
Digital Media: The biggest continue to get bigger
Largest platforms gaining share as worlds collide: Digital
advertising is experiencing a consolidation in share by the largest
players. We recommend Alphabet and Facebook given both are the
biggest beneficiaries of share consolidation and should benefit from
the continuing theme of ad dollars shifting from offline channels,
including the migration of TV dollars to digital video.
Key Themes:
 Competition for ad dollars rising as mobile tailwinds
continue to lessen; biggest platforms winning: Pressure is
mounting for digital media companies to deliver organic growth
as mobile usage tailwinds have slowed, particularly in developed
markets. Given their user scale / data advantages, the biggest
winners have been the largest platforms – Alphabet and
Facebook. 2017 should see a continuation of the largest
platforms gaining share. More broadly, digital advertising
continues to take share from print and other incumbent media
platforms, as we believe the share shift from TV has also begun.
Industry estimates for TV advertising over the next few years
have been declining and we remain skeptical of the growth rates
implied by industry forecasts, particularly as benefits in 2016 from
the U.S. Presidential election and the Summer Olympics are
lapped.
 Simultaneously, 2016 has seen growing monetization of
newer social platforms: 2016 has seen earnest monetization
efforts for Instagram, Snapchat, and Pinterest, and we expect this
to continue in 2017, with other platforms such as FB Messenger
beginning to make early steps towards monetizing. We believe
Instagram has been a winner since opening up its API and
expanding ad products and expect it to grow revenue to ~$2.2B
in 2017. These platforms' growing monetization efforts should
increase competition for ad dollars, particularly for other smaller
players.
Stifel Ad Forecasts vs. Market Size Forecasts
Source: IDC, ZenithOptimedia, Stifel forecasts
Global Advertising by Medium
Source: IDC, ZenithOptimedia, Stifel estimates

9
Local Value-Added Services: Growth in payments, transactions, and
deliveries attract investments
Locally-focused digital media companies focused on providing
services to SMBs or facilitating transactions are continuing to
see growth. However, early success, coupled with large
addressable markets, has attracted rising levels of competition from
companies attacking these opportunities from a number of different
angles.
Key Themes:
 SMB-focused value-add services businesses have fared
better than local ad platforms: Key fundamental operating
metrics have been better for companies like GoDaddy and
Square that provide value-added services vs. primarily serving
SMBs as a marketing platform. These companies are seeing
growth from helping the historically under-served SMB sector
level the playing field with larger businesses.
 Rising competition in local transactions: Early success in this
space has attracted competition, particularly for companies that
are helping facilitate transactions. Square effectively invented the
point-of-sale dongle with a fixed, transparent fee, but today faces
competition from both legacy competitors who have developed
new offerings and a plethora of new startups.
 Restaurant delivery attracting investments: Online food
delivery was pioneered by GrubHub and Seamless in the mid-
2000’s but is undergoing a renaissance in the mid-2010’s as
companies like Caviar, Postmates, and DoorDash operate more
like logistics services, providing delivery for restaurants that have
never offered it. GrubHub has purchased several small
companies in the last year to offer delivery alongside its
traditional online takeout marketplace, while Amazon / Uber have
also invested in this area to complement their core business
offerings.
B2C Payments C2C Payments
Local Business Website Development
Local Restaurant Ordering / Delivery
Source: Stifel Research, eMarketer, Euromonitor

10
eCommerce: Amazon and Alibaba to retain dominant positions
Source: Stifel Research, eMarketer, Euromonitor, Adobe
Global eCommerce Growth and PenetrationeCommerce continues to gain share of consumer spending
globally. Faster growing international markets and mCommerce will
likely be the primary drivers of eCommerce growth going forward.
Key Themes:
 mCommerce is accelerating the channel shift: Time spent in the
retail category online is shifting from PC to mobile. Mobile
monetization continues to lag behind usage though the barriers are
waning through (1) the introduction of larger mobile screen sizes,
(2) more secure mobile payment options, and (3) more mobile
optimized sites and app development.
 Strong China eCommerce growth: China is the largest and one of
the fastest growing eCommerce markets in the world, growing at
28% y/y. Alibaba holds 75% share of the Chinese market.
 Limited eCommerce profitability: Price transparency and greater
eCommerce competition limit the margin opportunity. We expect the
continued shift in developed markets from 1P to hybrid models to
improve profitability. In emerging markets 3P models are more
preferable.
 Buying through social platforms: We expect eCommerce through
social platforms to continue to become more of a focus in 2017.
eCommerce activity on social platforms remains somewhat limited
though it is gaining traction. We think consumers will pick up
adoption as social players add contextual commerce features.
 Logistics helps drive customer retention: Whether through
owned and operated distribution centers or deeper partnerships with
3PL’s eCommerce platforms are focusing on faster delivery in order
to improve the customer experience. Amazon, through a growing
distribution footprint, and Alibaba, with its Cainiao and investments
in 3PLs, are strengthening their delivery capabilities so that they can
fulfill the growing order volumes on their platforms, especially during
peak periods.
1,233 1,471 1,700 1,922 2,143 2,356
16.5%
19.3%
15.6%
13.1%
11.5%
9.9%
8.9%
10.2%
11.2%
12.1%
12.7%
13.3%
-4.0%
1.0%
6.0%
11.0%
16.0%
21.0%
26.0%
$400
$900
$1,400
$1,900
$2,400
$2,900
2013 2014 2015 2016E 2017E 2018E
Global eCommerce Sales eCommerce Growth (y/y) Global eCommerce Penetration
GlobaleCommerceSales($Billions)
98 184 315 429 549 669
14.1%
21.7%
31.8%
36.5%
40.1% 43.0%
75.3%
87.9%
70.8%
36.3%
27.7%
22.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$0
$100
$200
$300
$400
$500
$600
$700
$800
2013 2014 2015 2016E 2017E 2018E
Global mCommerce Sales Global mCommerce Penetration
Global mCommerce Growth y/y
GlobalmCommerceSales($Billions)
Global mCommerce Growth and Penetration
Note: Reflects only Euromonitor estimates which exclude C2C commerce

11
Video: Original content driving differentiation; Netflix, Amazon, Google,
and Alibaba accelerating globalization/cord cutting
Source: Company reports, Sandvine, Stifel estimates
Video should continue to shift toward the “what you want when you
want” model pioneered by our favorite idea in the segment, Netflix. While
favoring online video (and Netflix) had once been controversial, as many
traditional media sponsors were slow to recognize the power of the shift,
it is now consensus to sponsor change.
Key Themes:
 Original content drives platform differentiation: As the online
streaming video landscape becomes more competitive, original
content is playing an increasingly important role in maintaining and
growing subscribers. Netflix continues to lead the charge, on track to
produce well over 600 hours of original content in 2016 with plans to
debut over 1,000 hours of original programming in 2017. HBO, Hulu,
and Amazon are also heavily investing in new original content to
entice more users to their platforms. For instance, the product of
HBO’s series Vinyl (cancelled after 1 season) and Westworld were
both reported to cost in the $100mm range. We expect this trend to
continue to play out as more consumers weigh the costs and benefits
of different streaming and traditional cable offerings.
 Deep-pocketed players pushing globalization and accelerating
cord cutting: Netflix executed on its strategy to become fully global
early in 2016 by entering ~130 additional countries, and has been
aggressively pursuing its original content-driven expansion strategy
since. In the process, it is transforming the industry, pushing content
owners to think about and grant global rights vs. traditionally licensing
content on a region by region basis. Alongside this, Alibaba continues
to build on its media platform Youku, Google is expanding its YouTube
Red offering, Amazon is increasingly investing in video (scoring critical
acclaim for hits such as Bosch and Transparent), and more traditional
players like HBO, ShowTime, and others have introduced and
promoted their OTT offerings in the past 12-18 months. We believe
the digital video transition in 2017 will build on momentum from 2016
and will see an acceleration in the ongoing trend of cord cutting.
North America % of Peak Fixed Access Traffic
Hours of Original Programming and Value per Hour
30%
33% 32% 34% 36% 35%
1%
2% 2%
2%
2% 3%1%
2%
2% 4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2011 2012 2013 2014 2015 2016
SandvinePeakDownstreamTraffic-NA
Netflix Hulu Amazon
-
2
4
6
8
10
-
200
400
600
800
1,000
1,200
2013 2014 2015 2016E
HoursofOriginalProgrammingper$Spent
(Annual)
CumulativeHoursofOriginalProgramming
Netflix Amazon Hulu
Netflix per $ Amazon per $ Hulu per $

12
FinTech: Emerging segment that may become disruptive force in yet
another excess margin industry
Source: Federal Reserve, FDIC, Nilson, U.S. Census,
Source: Liberum
Global Major Marketplace Lending Platforms
484
1,083
5,351
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
TAM($Billions)
Sales by Firms with <$100K Annual
Rev
Sales by Firms with $100K-$500K
Annual Rev
Total U.S. Card Payments
FinTech may emerge as a successful new segment of Internet
bolstered by the increased use of mobile devices (payments) and an
intense regulatory climate for incumbents (credit).
Key Themes:
 Low penetration rates into large addressable markets: Whether it
is unsecured consumer credit, SMB loans, or offline SMBs, all of our
covered finTech companies today have very low penetration rates
into their respective addressable markets.
 Increasing credit cycle concerns: Many alternative finance
companies have operated in amid a low interest rate and benign
consumer credit environment. Performance through an entire credit
cycle is an unknown for many players and remains a key risk for
many investors.
 Increased transparency & ease, or even first-time access:
Across the industry, payment products and loans are being offered
with much greater transparency and ease. For SMBs and investors,
often times these products represent the first time the merchant /
investor even gets access.
 Increased competition but also largely distorted headlines: For
PayPal, it has largely been headlines focusing on Apple / Google
Pay, neither of which threaten PayPal’s core online payments
business. For LendingClub, it has primarily been commentary from
much smaller and newer platforms regarding rising borrower
acquisition costs, despite evidence to the contrary.
 Increasing regulatory scrutiny: While mostly positive on the sector
thus far, there has been increased regulatory scrutiny, particularly in
the lending category, and we expect that to continue.
1,527
1,190
1,000
901
300
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
TAM($Billions)
Small Business Consumer
Auto loans Student Loans
Mortgages
$4,918
Sample Addressable Markets in FinTech

13
Online Travel: Major players consolidate power, look to new verticals for
long-term growth
Source: Company reports, Phocuswright, Smith Travel Research, PwC, Stifel estimates
The online travel industry has experienced consolidation and
vertical expansion as large players chase non-core opportunities
to extend growth and expand margins. We believe that the next year
will be a period of transition to an era of increased focus on share gains
and positioning for long-term growth in non-core travel verticals.
Key Themes:
 Consolidation may rationalize travel industry: The travel space
has experienced broad consolidation over the last 12-18 months led
by Expedia but also in China with Ctrip and in the traditional hotel
industry with Marriott. We believe the consolidation implies a
maturing industry where a few players compete for market share.
However we believe that the OTAs have carved out portions of the
market where they can gain share through their respective
strategies. Priceline continues to focus on organic growth specifically
in the lodging vertical while Expedia aims to offer a broader range of
travel services through a roll-up strategy. TripAdvisor, on the other
hand, continues to face challenges moving down the funnel and
capture a larger portion of booking economics on mobile.
 Pursuing growth in alternative accommodations: In order to
maintain growth, Expedia, Priceline, and TripAdvisor have all built or
acquired a presence in the alternative accommodations market,
which Airbnb has demonstrated is a major opportunity. We have
seen further investment in this vertical in 2016 as travel companies
attempt to capture incremental demand. The focus on alternative
accommodations should help the OTAs diversify away from hotel
macro risks and gain exposure to shifting traveler preferences
(particularly among millennials). Some of these companies have also
extended their platforms into restaurant reservations and attractions
in order to monetize the in-destination experience. We are positive
on the in-destination vertical expansion efforts, but do not see
considerable impacts to growth in the immediate term as these
businesses are still early in their development.
Global Bookings and Online Penetration
1,116
1,179
1,247 1,319
1,393 1,467
33.4%
35.4%
37.7%
40.0%
42.1% 43.9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2013 2014 2015 2016E 2017E 2018E
Online Travel Bookings
Global Offline Bookings
Online Travel Bookings Penetration
Bookings($Billions)
OnlinePenetration
Online
Growth y/y: 12.8% 12.0% 12.7% 12.0% 11.3% 9.6%
Global Addressable Room Nights (2016E)
Expedia
4% Priceline
7%
Other
89%
Note: TAM includes alternative accommodations, we estimate that HomeAway will generate
~70mm room nights in 2016 and add it to Expedia’s total room nights for comparison
purposes

15
Top Stock Picks
eCommerce, Online Travel, & FinTech
Alibaba
 Largest eCommerce company in the world with an asset-light, commission/advertising model
 75% market share in China
 Near-term investments and initiatives should improve long-term monetization and competitive position
 International expansion still in early stages, emerging markets present near/mid-term opportunities
Amazon
 Revenue momentum for the business continues to impress as Amazon remains well positioned as the leader in the rapidly growing eCommerce
and Cloud services market, while growth trends appear positive/stable with high-20’s to low-30’s growth in the last three reported quarters
 The international segment, one that worried us in the past, has made significant progress towards sustainable profitability
 Growth in Prime Members, who typically spend more on the platform, builds a stickier ecosystem which can support more sustainable revenue
growth
GrubHub
 Largest player in online takeout with strong competitive positioning that prevents international players from entering the domestic market
 High-quality consumer product offering that addresses the friction in the take-out ordering process
 Attractive business model that aligns interests of both customers and restaurants
PayPal
 We like businesses with sustainable competitive advantages, long growth runways, and strategically-minded management and we increasingly
believe that PayPal fits the profile we look for in long duration consumer technology investments and is the type of business that growth investors
should own for the long-term
 Recent events, including 3Q:16 earnings, lead us to break to the positive on long-standing PayPal debates including mobile platform technology
risk (Apple, Alphabet), supplier risk (Visa/MasterCard), innovation risk (One Touch), and credit risk
Priceline
 Priceline’s effective strategy to extend its share in secular growth markets organically has demonstrated the strength of the platform’s
competitive moat
 Priceline may face near-term headwinds from ad ROI pressure, but we view the platform as one of the most disciplined, efficient ad spenders in
our coverage

16
Top Stock Picks
eCommerce, Online Travel, & FinTech (Con’t)
Square
 The company should continue to execute on the top-line with the extension of products/services (effectively widening the TAM), while ongoing
tailwinds from the secular shift to electronic payments as well as the transition to EMV should benefit growth
 Software services and Square Capital continue to expand and will help the company achieve its long-term target margin goal
 Results have demonstrated the company’s ability to gain share among larger merchants, which comprised 43% of total GPV in 3Q:16
Digital Media & Advertising
Alphabet
 New CFO and recent corporate restructuring suggest Alphabet is giving shareholders exactly what they’ve wanted – increased transparency and
increasing fiscal discipline
 After separate disclosure for business segments, investors are likely to see higher profitability in the core Google business and likely rapid
growth from their longer-term investments. The combination may result in multiple expansion, particularly as shares today have valuation support
 Recent gross-margin stabilization and Google mobile search / video / programmatic ad initiatives should allow for continued earnings growth
Facebook
 Dominant Internet platform that’s gaining share of ad budgets
 Continues to post strong growth, with over 59% y/y FX-adj. growth in 3Q:16 advertising revenue
 We believe further upside potential remains, driven by Instagram, Facebook Audience Network, video ads, Messenger, and VR
Netflix
 An increasingly global and dominant video platform: we estimate 153mm global subscribers by 2020
 Transition risk remains as the company sees slowing domestic subscriber growth in the profitable U.S. segment but continuing international
expansion at a faster pace than previously expected
 In our opinion, 2016 is one of the strongest content lineups in the company’s history, while the company expects to produce 1,000 hours of
original content in 2017
Pandora
 Largest U.S. digital music service attacking a $16B opportunity in broadcast advertising dollars
 Pandora’s mid-tier subscriptions have shown early signs of encouraging traction with consumers and its on-demand service could potentially be
even more compelling
 Potential upside in gaining radio spend proportionate to listening, success in automobiles, and international expansion

18
Alibaba (BABA) – Buy, $120 PT
Source: Company reports, Stifel estimates
Strong Quarter; Continuing to Invest for Long-Term Growth
Alibaba delivered another strong quarter as revenue increased 55% y/y in-line with our above consensus expectations, highlighted by strength in
core commerce, cloud services, and digital media and entertainment. Revenue excluding Youku and Lazada increased 43% y/y, following a 47% y/y
increase last quarter. Adj. EBITDA margin of 46% was also in-line with our above consensus expectations as core margins expanded and narrowing
losses in cloud services offset margin contraction from long-term investments. We maintain our positive view on management’s execution as
Alibaba evolves into a global ecosystem that directly addresses the growing eCommerce, digital media, and cloud services markets.
F2Q:16 Update:
• F2Q:17 Recap: Revenue of ¥34.3B (55% y/y) was in-line with our estimate and above the ¥34.1B consensus estimate as Core Commerce
revenue (41% y/y growth), cloud services (130% y/y growth), and digital media and entertainment (302% y/y growth) segments posted healthy
growth trends. We note that this quarter’s total revenue growth saw a mid-single digit percentage benefit from the increased ad load (versus ~8%
in F1Q:17). Active buyers increased 5mm sequentially (up 14% y/y) to 439mm buyers and mobile MAUs increased 23mm sequentially (up 30%
y/y) to 450mm. TTM China Retail Marketplace revenue per active buyer increased 24% y/y while TTM mobile revenue per mobile MAU increased
74% y/y (versus 84% last quarter). Adj. EBITDA of ¥15.9B (46% margin) was generally in-line with our ¥15.6B estimate (45% margin). The Cloud
services business narrowed losses in the quarter from a loss of ¥158mm in the prior quarter to a loss of ¥57mm, though management intends to
prioritize growth over profitability. Core commerce EBITA margin in the quarter was flat with the prior year at 62%. Investment in digital media and
entertainment and innovation initiatives continue to work against margins. Non-GAAP EPS of ¥5.26 (+45% y/y) was ahead of our ¥4.90 forecast
and ¥4.67 consensus.
• Beyond the Quarter: Alibaba continues to post strong operating results as management executes well on its strategy to improve mobile
monetization and user engagement as well as expansion into new verticals and geographies. Management is maintaining the FY:17 revenue
growth guidance of 48% y/y. In the back half of FY:17 the company will begin comping the ad load increase which we have already incorporated
in our numbers. As a result our top-line estimates see little change for FY:17. That said, we believe optics of the tougher comparisons may be
weighing on shares intra-day following the 3Q:16 strong report. Management continues to emphasize growth over profitability in the near-term as
it invests in the core business (Tmall Supermarket, international and rural expansion) and earlier stage segments (cloud services and digital
media). We continue to see a strong runway for growth as the company builds a defensible global commerce ecosystem with multiple avenues to
drive deeper value to consumers and merchants. Our $120 PT is supported by our DCF analysis.

19
Alphabet (GOOGL) – Buy, $950 PT
Just Keeps Growing
One year after its corporate reorganization from Google to Alphabet, the company beat 3Q revenue / profitability estimates as it continues to see
strength from mobile search, video, programmatic, and Google Play. Alphabet has successfully comp’ed the first full quarter of the addition of a third
mobile ad unit and continues to see runway for growth in its core ad business, while investing in other areas such as Google Cloud and hardware.
We maintain our Buy rating on Google shares and raise our 12-month Price Target to $950.
3Q:16 Update:
• Alphabet engine continues to perform: Revenue and profitability slightly beat consensus expectations in 3Q:16 as revenue growth of +20% y/y
(from +22% growth in 2Q) continued to be driven by the secular shift to mobile search, strength in video (YouTube), adoption of programmatic
advertising, and Google Play. Traffic Acquisition Costs (TAC) as a percentage of gross advertising revenue increased +5% q/q as higher TAC for
mobile search offset the benefit from the mix-shift from Network to Sites. TAC as a percentage of Sites / Network revenue is expected to continue
to increase as mobile / programmatic adoption see continued strength. Management highlighted Google Cloud's substantial revenue growth as it
continues to invest in the platform (opening 8 new cloud regions in 2017) to capture more of this large and fast-growing market. Management also
noted marketing spend will likely be elevated in 4Q as new Google hardware products are promoted over the holidays. After completing its $5B
buyback program last quarter (initiated in 3Q:15), Alphabet authorized a ~$7B share buyback program this quarter.
• 3Q:16 highlights: Alphabet’s net revenue of $18.27B came in ahead of consensus of $17.99B, while total gross revenue grew +20% y/y (+23%
ex-FX) to $22.45B in 3Q and was roughly in-line with consensus estimates. U.S. revenue grew +22 y/y, U.K. revenue grew +5% y/y (impacted by
the decline of the GBP; +18% ex-FX), and RoW revenue grew +22% y/y (+25% ex-FX). Alphabet’s Other Bets generated $197mm in revenue in
3Q:16 (+40% y/y), primarily from Nest, Fiber, and Verily, and the segment contributed GAAP / non-GAAP operating losses of $865mm / $665mm
for the company. Core Google reported $5.77B in GAAP operating income on $22.45B in revenue (~32% margin).

20
Amazon (AMZN) – Buy, $888 PT
Investing in AWS, Content, Fulfillment, and India
Amazon reported strong 3Q topline results (29% y/y revenue growth) generally in line with our and Street expectations. CSOI margins were in line
with our below-consensus expectations as the company continues to ramp investment in key initiatives such as fulfillment, video content, AWS,
Echo, and India. Amazon guided 4Q:16 revenue growth in line with expectations though again guided operating income below our and Street
estimates. Topline momentum for the business continues to impress as Amazon remains well positioned as the leader in the rapidly growing
eCommerce and Cloud services markets. While heavy near-term investment will work against margin expansion through the balance of 2016 and
into 2017, we appreciate the heightened level of investment as we believe it is needed to support this level of growth. We maintain our Buy rating
and $888 target price.
3Q:16 Update:
• Revenue in line with expectations: Total revenue increased 29% y/y on an FX-adj. basis to $32.7B, generally in line with our and Street
estimates of $32.4B and $32.7B, respectively. Topline growth decelerated modestly (from 30% to 29%) against more a difficult comparison (30%
versus 27% last quarter). FX was just a $52mm benefit to revenue in the quarter. Paid unit growth of 28% was equal with last quarter and versus
26% y/y growth in the prior year. AWS revenue increased 55% y/y to $3.2B (in line with our estimate), though decelerated modestly as expected
from 58% in the prior quarter. NA revenue increased 26% y/y (a deceleration from 28% last quarter) while International revenue increased 28%
y/y on an FX-adj basis following a 28% clip last quarter.
• Margins below estimates driven by international investments: Operating income of $575mm (1.8% margin) was slightly below our $589mm
(1.8% margin) estimate and below consensus expectations of $672mm (guidance of $50mm-$650mm). CSOI of $1,383mm was in line with our
$1,398mm estimate though below $1,465mm consensus. CSOI margin increased 31bp y/y to 4.2% of sales, below our 4.3% estimate. NA retail
segment margin increased 16bp y/y to 3.7% of sales while the international retail segment margin decreased 245bp y/y to 3.1%, the lowest level
in recent history resulting from heavy investment in India, Prime and increased selection. AWS segment margins remained strong at 31.6% of
sales (versus 25.0% last year), above 29.9% last quarter.
• Beyond the quarter: Amazon’s 4Q:16 operating margin guidance came in lower than expectations as a step up in investment in key growth
areas of the business including Prime, FBA, AWS and emerging markets is needed to support the strong pace of growth. The absolute level may
come as somewhat of a surprise given Amazon’s greater scale and additional levers the company has to offset the hit on margins from
investment (relative to prior heavy investment periods). We expect Street margin estimates to be revised towards our expectations as the margin
expansion narrative may be pushed out. While heavy investment will work against the path to higher profitability over the near to intermediate
term, we are comfortable where the investment is focused and believe investment initiatives will generate positive returns over the long term.

21
Facebook (FB) – Buy, $155 PT
Early Xmas Gift
Facebook topped consensus 3Q revenue / EPS estimates by 1% / 12%, though the company beat expectations by narrower margins than its past
several quarterly revenue / EPS beats. Management reiterated that top-line growth will likely meaningfully decelerate in 4Q:16 / 1H:17 as the ad
business faces tougher comps, but we think ramping contributions from video / Instagram advertising will continue to drive impressive growth going
forward. We reiterate our Buy rating on Facebook shares and leave our $155 target price unchanged. We think a material pullback in Facebook
shares, as indicated by after-market trading on 11/2, would create a compelling buying opportunity for the fastest-growing mega cap company in the
Internet space.
3Q:16 Update:
• Facebook growth remains impressive after slight 3Q beat: Facebook posted narrower top- and bottom-line beats than in recent quarters but
maintained momentum in both consumer engagement and the advertising business. Facebook’s DAUs / MAUs both accelerated noticeably and
daily engagement held steady at ~66%. Facebook posted its 14th consecutive quarter of advertising growth of +55% y/y ex-FX or better as ad
revenue grew +59% y/y in 3Q:16 (vs. +63% y/y in 2Q). Facebook now has 4mm active advertisers on core Facebook / 500k advertisers on
Instagram, and still has a long runway with over 60mm total business pages on Facebook / 1.5mm on Instagram (despite launching the latter in
just the past few months). Facebook reiterated its outlook for advertising revenue to meaningfully decelerate as it faces increasingly tougher y/y
comparisons over the next few quarters as the company laps accelerating revenue growth in 4Q:15 / 1H:16. Facebook also reiterated guidance
that ad load, one of the three primary drivers of Facebook’s impressive growth over the past three years, is expected to grow modestly until
2H:17, after which it’s expected to become a less meaningful driver of ad revenue growth. However, we think contributions from ramping ad
products like Dynamic Product Ads, Instagram ads, and video advertising units could help the company’s growth remain strong in 2017 and
beyond.
• 3Q:16 highlights: Facebook’s total revenue grew +56% y/y to $7.01B, approximately 1% above the Street’s $6.92B forecast. Similar to 2Q:16,
the impact of FX was immaterial to top-line growth. Advertising revenue grew +59% y/y to $6.82B (decelerating from 2Q's +63% y/y growth, as
management expected) and beat the Street's +56% y/y growth forecast. DAUs / MAUs grew +17% / +16% y/y to 1.18B / 1.79B and engagement
remained at roughly 66%. Management lowered its FY 2016 GAAP operating expense growth guidance to the low end of the previously provided
30%-35% y/y range and lowered its non-GAAP expense growth to 40%-45% from 45%-50% y/y. Management noted it will invest heavily in capex
/ engineering talent in 2017, but we believe y/y growth in total operating expenses will be materially slower than 2016 levels; we model GAAP /
Non-GAAP expense growth y/y of +27% / +34% in 2017 vs. our +30% / +41% forecasts for 2016. Additionally, beginning in January 2017,
Facebook will also adopt a cash settlement methodology for stock-based compensation in an effort to offset future dilution by leveraging its
sizable (~$26B) cash balance. Under this new approach, during the first nine months of 2016 the company would have reduced dilution by
~15mm shares and increased cash outflows by ~$1.8B. Going forward, we model similar quarterly cash outflows and roughly ~50% less dilution
than we were previously modeling until we get more clarity on how this plan will flow through Facebook’s financials.

22
GrubHub (GRUB) – Buy, $46 PT
Strong Execution Outweighs Competition Risks
GrubHub shares have fallen by over 20% since reaching a 52-week high of nearly $45 in late September (the S&P 500 fell less than 1% over this
period) despite strong fundamentals and respectable 3Q:16 results. The company has exhibited solid execution in its core marketplace business
and impressive growth in its emerging delivery business, while competition does not appear to be having a material impact on the company’s
results. With shares trading below 16x 2017 EV / EBITDA (as of 11/11), we believe risk / reward in GRUB shares once again appears compelling,
especially to investors with a long-term focus. We upgrade GRUB shares to Buy and leave our 12-month target price of $46 (roughly 21x 2017 EV /
EBITDA) unchanged.
Company Update:
• GrubHub's fundamentals remain strong: We think GrubHub's recent share price performance has more to do with investors' growth
expectations getting ahead of themselves than anything being wrong with the company fundamentally. GrubHub's recent 3Q:16 results were solid
as the company accelerated organic revenue / order frequency growth due largely to product improvements that should continue to benefit the
company moving forward. GrubHub's core marketplace business continues to perform well and has already surpassed the long-term target adj.
EBITDA margins (35%) the company set out at the time of its IPO. Delivery investments have weighed on margins on a percentage basis but the
company is approaching an impressive $500mm gross food sales run-rate for delivery orders. GrubHub's delivery business has been steadily
gaining efficiency and its investment levels are expected to be de minimis by 2H:16.
• Competitive positioning stable: GrubHub's recent results suggest that competition is not impacting the company's growth. Yelp's 3Q:16 results
suggest GrubHub is growing faster on an organic basis than the smaller Eat24, which had been growing faster on a much smaller revenue base
until recently. The smaller venture-backed startups like Postmates and DoorDash have relevant scale in delivery but future growth may be
tougher to come by if they're forced to prove out the viability of their business models without a profitable marketplace business to fall back on.
Uber has been investing a great deal in UberEats, which appears to be getting some traction with consumers (particularly on the west coast), but
its growth still does not appear to be impacting GrubHub. Amazon is still offering restaurant delivery as a complement to its same-day
eCommerce efforts and so far hasn't shown the desire to invest in building a full-fledged GrubHub competitor.
• CEO comments not an issue: GrubHub shares retreated by ~5% on Friday, November 11, after CEO Matt Maloney sent a letter to employees
speaking out against some of the views expressed by candidates during the U.S. election. The message of the email was largely misrepresented
by media outlets and we think the stock pullback was an overreaction. If anything, the CEO's comments might resonate with diners in some of the
company's less dominant markets like San Francisco.

23
Netflix (NFLX) – Buy, $140 PT
Stranger Things Have Happened
Netflix reported strong 3Q:16 results, beating consensus subscriber forecasts domestically and internationally, as a robust slate of original content
contributed to outperformance in the quarter while issues stemming from the company's recent price increases faded into the background. Netflix
announced it will be releasing 1,000 hours of original content in 2017, which is up significantly from around 600 hours in 2016 as the company
continues to aggressively pursue its content-driven global expansion strategy.
3Q:16 Update:
• 1,000 hours of original content in 2017: Netflix plans to release over 1,000 hours of original programming in 2017, which would be a significant
increase from its target of 600 hours in 2016 (though management expects to comfortably surpass 600 hours this year). Streaming content spend
is expected to be roughly $6B in 2017 on a P&L basis (up from ~$5B in 2016) and management highlighted it plans to continue increasing
content spend for “quite a long time” as it expands its original content library globally. Netflix is increasingly producing and owning more of its
original content (vs. licensing from third parties), which generally requires more cash upfront but can be more cost effective over the long run.
However, because of these increased cash needs, Netflix's cash burn for 2016 is now expected to be ~$1.5B (a few hundred million dollars
higher than originally anticipated) and the company noted it intends to raise additional capital through a debt offering in the coming weeks.
• 3Q:16 highlights: Netflix’s 3Q:16 net subscriber adds handily beat expectations as management attributed subscriber upside to the strength of
its original programming lineup, including unexpected hit Stranger Things and Season 2 of Narcos. Netflix added 370k domestic streaming
subscribers vs. its forecast of 300k net adds, while its 3.2mm international net subscriber additions were well above guidance for 2mm net adds.
As of 3Q:16, the company has added 12mm global members this year, in-line with Netflix's net adds through the first three quarters of 2015.
Guidance for 4Q:16 came in above Street expectations both domestically and internationally, with 1.45mm net adds expected domestically (vs.
1.27mm consensus) and 3.75mm net adds forecasted internationally (vs. 3.32 consensus). According to the company, 75% of the un-
grandfathering process was completed by the end of 3Q and the process should be completed in mid-November.
• Content momentum expected to continue in 4Q: Netflix is expecting a strong positive reception to its ambitious original series The Crown
which will be released on November 4th. Other notable releases planned for 4Q that could move the needle on subscribers include Gilmore Girls:
A Year in the Life and Season 2 of Fuller House. Management noted that Zootopia, the first major film to added to Netflix's content library as part
of the Disney Pay 1 deal, has been a popular choice among viewers. The Jungle Book and Captain America: Civil War may also be available on
the platform by the end of the year.

24
Pandora Media (P) – Buy, $15 PT
Pandora Misses 3Q Expectations, Shifts Focus to Subscriptions
Pandora missed 3Q:16 expectations on the top- and bottom-lines and lowered its outlook for 4Q as the advertising business continued to slow amid
Pandora’s shift in focus toward its new and upcoming subscription products. During its Analyst Day presentations, management announced
Pandora’s upcoming on-demand service will be called “Pandora Premium” and the product will be unveiled at an event in NYC on December 6th,
with an official launch to consumers slated for early 1Q:17. Despite recent challenges in the advertising business, Pandora’s mid-tier subscriptions
have shown early signs of encouraging traction with consumers and its on-demand service could potentially be even more compelling. We lowered
our Price Target to $15 (from $16) and maintained our Buy rating on Pandora shares.
3Q:16 Update:
• 3Q:16 highlights: Pandora’s revenue grew just +12% y/y to $352mm in 3Q, materially below consensus of $366mm and guidance for $360mm-
$370mm. Pandora noted continued softness in the entertainment / telecom verticals contributed to the shortfall in ad revenue, though local
advertising delivered another quarter of steady (albeit decelerating) growth despite no meaningful investments in local salespeople in over a
year. Pandora’s subscription revenue grew +1% y/y to $56mm, driven by ~77k new Pandora One subscribers. Pandora’s audience metrics held
steady as active listeners of ~78mm were roughly flat q/q and y/y, while listener hours kept up their recent growth pace (+5% y/y) despite some
minor listening controls being implemented to limit costs as well as a noticeable decrease in marketing spend (~$16mm vs. ~$25mm in 2Q).
• Weaker outlook for 4Q: Pandora lowered its outlook for 4Q as it now expects revenue of $362mm - $374mm (vs. ~$390mm implied by the
midpoint of the 2Q full year guide) as it expects an ~$18mm hit from continued softness in key digital ad verticals and a $4mm impact from using
inventory previously earmarked for programmatic ads to run subscriber conversion campaigns. Pandora’s profitability outlook was adjusted
downward even further as the company expects an adj. EBITDA loss of -$39mm to -$51mm in 4Q vs. prior implied guidance of +$23mm at the
midpoint. The rest of the difference (beyond the $22mm revenue impact) is explained by a $22mm step-up in royalties for existing businesses as
Pandora shifts to direct licensing and $24mm in incremental opex investments for the company’s new subscription products.
• Pandora stands by $4B 2020 revenue target, offers cost transparency for subscriptions: Pandora reaffirmed its outlook for $4B in total
U.S. revenue by 2020 with the same segment contributions expected - $2.4B from core radio (includes Pandora Plus), $1.3B from on-demand
(11.3mm subs @ $9.99 per month), and $300mm from ticketing and sponsorship. Pandora believes the ad-supported business can reach $80+
RPMs by 2020 with 60% contribution margins / 25% operating margins. The biggest driver of the RPM gains is expected to be ad load, as
Pandora is finally ready to raise its max loads in its Top 30 cities (which are all sold out in the 25-54 demo today) once it launches the on-
demand product so users annoyed by ads won’t be pushed to subscribe to a competing service. Pandora offered quite a bit of data on how it’s
sizing the markets for Pandora Plus (7-10mm potential U.S. subs by 2020) and Pandora Premium (50+mm potential U.S. subs) and
transparency on the cost structure of each business (42% contribution margin / 15% operating margin for Pandora Plus, 37% / 10% for Pandora
Premium), which we will explore in greater detail as we dive deeper into Pandora’s opportunity in paid subscriptions.

25
PayPal (PYPL) – Buy, $49 PT
Upgraded to Buy, $49 PT; Stable, Consistent, and Robust Growth; A Tech Platform
We like businesses with sustainable competitive advantages, long growth runways, and strategically-minded management. We increasingly believe
that PayPal fits the profile we look for in long duration consumer technology investments and is the type of business that growth investors should
own for the long-term. Recent events, including this evening’s earnings report, lead us to break to the positive on long-standing PayPal debates
including mobile platform technology risk (Apple, Alphabet), supplier risk (Visa/MasterCard), innovation risk (One Touch), and credit risk. We have
seen (1) limited impact from recent Apple/Alphabet initiatives, (2) deals with Visa/MasterCard projected to still allow for stable/improving medium-
term margin, (3) One Touch is now approaching 36mm consumers at 5mm merchants, and (4) management has suggested a coming shift to a more
asset light credit model (something we supported in a recent note). We believe PayPal’s multiple is going to rise on the back of positive resolution of
recent debates and that the stock will begin to trade more like a technology platform company. We would be aggressive buyers of the PayPal shares
with a $49 12-month Price Target, supported by our DCF analysis.
3Q:16 Update:
• Solid 3Q:16 results across the board: PayPal reported better than expected revenue and in line non-GAAP EPS (at the high end of guidance).
Revenue upside versus our estimate stemmed from better other value-added revenue. TPV of $87.4B (up 28% y/y FX-adj.) was modestly below
our $88.4B estimate (up 28% FX-adj.). Mobile volume growth was 56% y/y, representing 29% of TPV. Active customer accounts grew 11% y/y to
192mm (with 15mm active merchant accounts). Payment transactions per active customer account increased to 30 versus 29 last quarter, and 27
last year, as customer engagement continues to improve. Revenue grew 21% y/y FX-adj. to $2.67B, accelerating from 19% y/y growth last
quarter, above our consensus-matching estimate of $2.65B. The transactional take rate of 2.65%, which was slightly below our estimate of
2.66%, declined 19bp y/y due to mix shift to larger merchants and P2P growth. Non-GAAP EPS of $0.35 ($0.01 benefit from tax) was slightly
above our $0.34 estimate and in line with the consensus estimate of $0.35. Transaction expenses were slightly above our expectations (0.95%
versus our 0.94% estimate) as Braintree skews the funding mix towards credit cards. Non-GAAP operating margin of 18.4% (versus our 18.7%
estimate) declined roughly 160bp y/y as the company invests in the business and increased headcount ahead of 4Q.
• 2016 guidance and three-year outlook raised: Management ticked up the low end of its FY:16 revenue and non-GAAP EPS guidance while
maintaining the high end. More importantly, management provided its FY:17 outlook and updated its medium-term guidance (from the recent
analyst day in May) with a three-year outlook. The three-year outlook calls for FX-adjusted TPV growth in the mid-20% range, in line with prior
guidance, and FX-adjusted revenue growth of 16%-17%, up from 15% prior. Additionally, management maintained its outlook for stable to
growing non-GAAP operating margins. We believe this alleviates the risk many investors held that the recent partnerships with Visa and
MasterCard would work against margins. Management guided FY:17 revenue to 16%-17% and noted operating margin consistent with FY:16 as
incremental expenses associated with customer payment choice initiatives will be offset by other revenue and cost initiatives. We had raised our
revenue estimates and reduced margins following the Visa announcement reflecting the ramp up in transaction expenses as the funding mix
shifts toward credit and debit cards. We are adjusting our model to reflect greater visibility.

26
Priceline (PCLN) – Buy, $1,900 PT
Upgraded to Buy With a $1,900 PT
We are upgraded Priceline shares from a Hold to a Buy on 11/9 with a $1,900 price target based on the company’s recent growth execution and
consistent ability to navigate competitive and macro headwinds. Priceline’s effective strategy to extend its share in secular growth markets
organically has demonstrated the strength of the platform’s competitive moat. We believe that the company fits alongside other dominant internet
franchises such as Amazon, Google, Facebook, and Alibaba. Last quarter the company accelerated room night growth to 29% y/y, adding 34mm
incremental room nights y/y, the largest in the company’s history. For 2017 we expect room nights growth of 22% y/y despite its scale (~7.6% global
penetration), which is comparable to our estimates for Amazon’s 26% y/y paid unit growth and Google’s 23% y/y paid clicks growth. Priceline may
face near-term headwinds from ad ROI pressure, but we view the platform as one of the most disciplined, efficient ad spenders in our coverage. This
concentration on ROI and technology could provide leverage upside to our model over the long-term as customer LTV grows with better conversion
and up-sell rates. The company’s track record exhibits the key qualities of a high quality internet franchise and we believe shares present a long-
term growth opportunity from current levels.
3Q:16 Update:
• Strong Results: Total bookings of $18.5B (up 26% y/y FX-adj.) came in well above the $16.8-$17.6B guided range and above our $17.6B
estimate, as room night growth accelerated 29% y/y, to 149.6mm versus 24% y/y in 2Q. Gross profit of $3.59B slightly topped our $3.53B
estimate and the street's forecast of $3.51B. Gross profit as a percentage of gross bookings in 3Q deleveraged 41bps y/y, primarily due to a
normal book versus daytime lag with accelerating gross bookings growth, and an expanding booking window. Adj. EBITDA of $1.85B exceeded
our $1.75B estimate (48% of gross profit) and Non-GAAP EPS of $29.69 surpassed our $27.48 estimate. Priceline incurred a $941mm goodwill
impairment charge during the quarter due to a write-down of the carrying value of OpenTable. Management said long-term forecasts for the unit
as were reduced following a "change in strategy" and a shift in expectations surrounding international expansion, as investments are made at a
more measured pace. Additionally, the company announced Brett Keller as CEO of Priceline.com, after being named interim CEO of the unit in
June. Management had no material updates on the CEO search for the Priceline Group.
• Beyond the Quarter: 4Q:16 top-line guidance was ahead of our estimates, but the adj. EBITDA and Non-GAAP EPS estimates were less
favorable than our forecasts. Management guided 4Q room nights and bookings growth to 20%-25% y/y and 17%-22% y/y FX-adj. versus our
22% and 21% estimates respectively. The company guided gross profit to $2.12-$2.22B (14%-19% y/y FX-adj.), above our $2.17B estimate. The
Adj. EBITDA guide of $755-$795mm was below our $814mm estimate as performance ad ROIs face increasing pressure. The company expects
flat y/y FX-adj. ADR growth for 4Q:16 following a <1% headwind this quarter.

27
Square (SQ) – Buy, $15 PT
Square Up the Ball
Square reported 3Q:16 results ahead of expectations and raised its full year guidance, again. The company grew Adj. revenue 51% y/y and
generated Adj. EBITDA of $11.6mm (6.5% margin). Square raised its full year Adj. revenue guidance by $16mm and raised its Adj. EBITDA margin
by 150bps. Momentum with larger merchants continued (GPV up 55% y/y) and Software and Data Product revenue accelerated to 140% y/y growth
(from 130% y/y last quarter). We are raised our estimates for 2016/2017 and maintain our positive view as management continues to execute its
plan to build a robust SMB services ecosystem. Our price target remains $15.
3Q:16 Update:
• Top-line and Margin Upside: GPV growth of 39% y/y to $13.2B was generally in-line with our expectation for $13.2B. Adj. revenue increased
51% y/y to $178mm (versus a 54% y/y last quarter) exceeding our $174mm estimate and the $171mm high-end of the guided range. The
transaction take rate remained relatively stable at 2.93% versus 2.95% in the prior year, a strong result given the growth in larger merchants and
better than our 2.92% estimate. Software and Data Product revenue accelerated to 140% y/y growth to $35.3mm driven by Capital, Caviar and
Instant Deposit. Square extended $208mm in capital to 35,000 sellers, up 70% y/y and up 10% q/q. The loan loss rate remained stable with the
prior quarter at 4%. Adj. EBITDA of $11.6mm (6.5% margin) was well ahead of our $5.9mm estimate (3.4% margin) and consensus expectations
of $7.1mm driven by leverage on a stronger top-line. Adj. EBITDA included a bump in the employer taxes associated with the exercise of stock
options in the quarter (in-line with internal expectations). Management now has more visibility into the employer taxes going forward.
• Beyond the Quarter: Management again raised its 2016 guidance to now reflect 50% Adj. revenue growth and Adj. EBITDA margin of 4.7% at
the midpoints, impressive results in the first year as a public company. Our estimates are at the high-end of each guidance range. We recently
upgraded shares to Buy as we have become more comfortable with the debates surrounding the company. Square has demonstrated success
moving up market amidst stronger competition while maintaining a relatively stable transaction margin. GPV from larger merchants comprises
43% of total GPV (versus 38% in the prior year). In addition, Square is effectively growing ancillary services with merchants as demand for capital
remains strong and newer services such as Instant Deposit gain traction (200K merchants have used Instant Deposit since launch). We see
Square’s simple, cohesive approach, innovative hardware, and SMB-focused software supporting continued share gains.

29
Care.com (CRCM) – Hold, $10 PT
Results Above Expectations; Working Through the Transition
Care.com reported 3Q results above our expectations and the high-end of its guidance. Revenue increased 13% y/y, and adj. EBITDA of $1.8mm
marked the fourth consecutive quarter of profitability. The company continues to perform well across business lines while gaining greater operational
leverage, with the emerging business Care@Work and International revenue continuing to outpace growth in the core business (61% y/y and 21%
y/y, respectively). Care.com raised its full year revenue guidance at the midpoint by $0.25mm and raised the bottom-end of the adj. EBITDA
guidance range, effectively increasing the mid-point by $0.75mm. While we like the longer-term optionality of Care.com’s efforts with transactional
care offerings and Care@Work, we remain Hold rated as we wait for further visibility into the company’s transition to mobile use cases.
3Q:16 Update:
• 3Q:16 Recap: Care.com revenue grew 13% y/y to $40.8mm, ~1% above our estimate of $40.3mm and above the high end of the $39.5mm-
$40.5mm guided range, largely due to upside in its Consumer Payments and Other businesses. Care@Work grew 61% y/y (sequential
improvement from 47% y/y growth last quarter) and International increased 21% (~300bps headwind from FX; up from 19% y/y growth in 2Q;).
Care@Work introduced a new sales channel during the quarter, adding sales reps for SMBs, and plans on expanding the enterprise sales team
in 2017. Despite the strong growth in 3Q, management did note Care@Work’s growth in 4Q is not expected to match 3Q due to the timing of its
contract signings. Adj. EBITDA of $1.8mm was well above our expectation of $0.8mm and above the high end of the guided range of $0.5mm-
$1.0mm. Sales and marketing expenses were reduced by roughly $1.3mm y/y and as a percentage of sales declined to 49% of sales versus 57%
in 3Q:15 as the company continues to shift to more online / organic marketing channels. Gross margins deleveraged on a y/y basis as: (1)
Care@Work grew faster than the overall business (a structurally lower margin business) though improving on a y/y basis from price increases
and operational optimization; (2) the U.S. Consumer background check product saw greater adoption benefitting ARPU; and (3) the Apple iOS
30% subscription tax came into effect. This GM trend is expected to continue going forward, somewhat offset by greater operational leverage.
Ending consumer matching members decreased 2% y/y, as retention was partially impacted by prior tests with subscription prices / duration.
However, management noted that retention has returned to expected levels QTD.
• Beyond the Quarter: Care.com continues to focus on several key priorities, including: growing organic traffic; testing and optimizing the mobile
experience / transactional product; expanding post-match services; and investing in Care@Work. We continue to believe management is
appropriately maintaining cost discipline to sustain profitability while it expands its transactional offerings, provides a greater breath of products
for care-seekers / givers (such as caregiver benefits), and invests in long-term opportunities such as Care@Work.

30
Criteo (CRTO) – Hold, $41 PT
CRTO Delivers Strong Revenue, Profitability in 3Q:16
Criteo outperformed consensus revenue / adj. EBITDA expectations in 3Q:16 and guided both measures above Street forecasts for 4Q:16. The
company is seeing momentum from continued growth in its client / publisher bases, strength in the mid-market segment, and adoption of new
product features / tools among both Tier 1 and mid-market clients. Management's above-consensus guidance does not include any impact from the
pending HookLogic acquisition (projected to close in early Novementr) or a material impact from its new Search product (launched in October in the
U.S.). We continue to view risk / reward in CRTO shares as being fairly balanced. Maintain Hold.
3Q:16 Update:
• 3Q results top expectations, 4Q guidance healthy: Criteo's 3Q results came above the high end of its guidance for revenue / adj. EBITDA, and
the company guided 4Q top- and bottom- lines above consensus forecasts after holding full-year guidance relatively flat last quarter. Criteo's
performance was aided by several factors, including: the continued growth of Criteo’s client base as the company added a record ~1000 new
clients (80% in the mid-market segment which now comprises 26% of revenue ex-TAC); expanding publisher relationships, with ~500 net new
publishers q/q; new product innovations, such as adaptive revenue optimization and automation tools for mid-market clients. Additionally,
management discussed its efforts to address header bidding, which include modifications to its bidding strategy and a header bidding "wrapper"
tool which is still in beta testing. On the call, Criteo also discussed the recent strategic announcements involving its acquisition of HookLogic and
the roll out of its Search product, though there were few incremental updates on either front. The pending HookLogic acquisition, which
management expects to close in the coming weeks, is not factored into the company’s 4Q guidance. Management did note it will provide more
guidance for Search during its 4Q:16 earnings call, but it believes the product is unlikely to materially contribute to revenue in 2016 as the product
just launched in the U.S. in October.
• 3Q:16 highlights: Criteo's revenue excluding traffic acquisition costs (rev. ex-TAC) grew +32% y/y (+30% ex-FX) to $177mm, which beat
consensus forecasts by ~2%. Americas revenue ex-TAC grew +31% y/y (+31% ex-FX), EMEA grew +23% y/y (+27% ex-FX), and APAC rose
+51% y/y (+34% ex-FX). Performance in the Americas was slightly below expectations due to mid-market hiring challenges and “temporary
executional issues” per management, but the company noted that sales headcount additions are now back on track and the Americas segment
should benefit from a leadership reorganization / the addition of the U.S.-centric HookLogic team. Adjusted EBITDA of $54mm beat consensus of
$45mm by nearly 20%. Guidance for 4Q revenue ex-TAC / adj. EBITDA was above expectations at the midpoint of the range; Criteo expects
revenue ex-TAC of $207mm-$210mm vs. consensus expectations for $206mm, while the company anticipates adj. EBITDA of $72mm-$72mm
vs. consensus of $69mm. Criteo's full-year outlook for revenue ex-TAC growth is now +33% to +34%, from +30% to +34% previously.

31
eBay (EBAY) – Hold, $31 PT
Not All Platform Transitions Are Created Equal
eBay reported in-line 3Q:16 GMV and revenue, and beat our Non-GAAP EPS estimates by a penny. FX-adj. GMV and revenue growth of 5% and
8%, respectively, were broadly in line with our expectations. Momentum in StubHub and Classifieds revenue continued in the quarter, increasing
32% and 14% (FX-adj.), respectively. The company repurchased $500mm shares during the quarter (in line with prior quarter). Management raised
its full year FX-adj. revenue growth guidance to 6.0%-7.0% (from 5.0%-6.0%), though it maintained the full year Non-GAAP EPS guide of $1.85-
$1.90 (expects to come in at the midpoint of the range). eBay is over a year into its transition, but we have yet to see a material financial impact from
its transformation efforts. We understand that it takes time to re-platform a company of this scale, but during this process, eBay faces increasing
competitive pressure, while its business is maturing. We remain Hold rated as we await more visibility into the transformation and long-term growth
profile of the platform.
3Q:16 Update:
• 3Q:16 Recap: eBay generated GMV of $20.1B (up 5% y/y FX-adj.), generally in line with our $20.2B estimate, and revenue of $2.22B (up 8% y/y
FX-adj.), roughly in line with our consensus matching $2.19B estimate. Active buyers increased 3% y/y TTM (following a 4% y/y increase last
quarter), with over 1mm added from last quarter. Management highlighted that new buyer acquisition was not seeing an impact from structured
data or SEO efforts. Marketplace transaction revenue grew 5% y/y FX-adj. StubHub continued its strong performance, growing revenue 32% y/y
FX-adj., partially driven by strength in concerts, theater, and baseball. Next quarter, StubHub will begin comping a full quarter of major product
improvements and will face tougher compares heading into 2017. Classifieds revenue grew 14% FX-adj. as Auto and Real Estate vertical
strength was partially offset by decelerating advertising growth. Non-GAAP EPS of $0.45 was a penny above our consensus-matching $0.44
estimate. During 3Q, eBay repurchased 16.5mm shares for $500mm, in line with our estimate ($2.3B now remains of the repurchase
authorization).
• Beyond the Quarter: eBay continues to make progress with its structured data initiative, with 60% of relevant listings' data collected and 48% of
relevant listings processed (up from 42% last quarter). The 10% uptick in conversion from new pages versus old pages continues to be consistent
with last quarter. The company reiterated that the benefits from these efforts will not hit in any one quarter, but rather over an extended period of
time. Heading into the holiday season management is further shifting the marketing spend toward the top of funnel, with plans to engage in TV ad
campaigns in the U.S. and Europe for the first time since 2014. eBay does not plan to start ramping search advertising spend until next year. Next
quarter, the company will also recognize the impact from the sale of its MercadoLibre stake ($1.2B gross proceeds, estimate $700-$800mm net),
but has yet to figure out the tax implications. Overall, we believe eBay has a long path ahead before the financial impact of its current initiatives is
seen, but we are constructive on the incremental improvements to the platform.

32
Expedia (EXPE) – Hold, $130 PT
Upgraded to Hold With a $130 PT
Expedia’s core business growth and integration risk related to HomeAway still give us caution, but we believe that the recent strength in Trivago,
Orbitz, and HomeAway have overshadowed our key concerns. As a result we are upgrading Expedia from a Sell to a Hold with a $130 price target
as the main transition risks have been sidelined, profitability expectations have been moderated, and long-term targets for HomeAway appear
reasonably achievable. We downgraded Expedia in February based on transition risks, U.S. macro concerns, and the potential impact of more
aggressive hotel direct book activity. The first two risks have largely played out, while the third one still remains to be seen. In 2Q and 3Q, organic
room night growth of 13% and 11% respectively were negatively impacted by a shift in resources to Orbitz which resulted in lower conversion rates
on the core business. HomeAway still requires more integration work during 2017, but management has already started tempering near-term
growth and margin expectations for the segment and may even provide additional metrics to help investors understand the transition. We believe
the slowing U.S. ADR and occupancy growth was a drag on core bookings growth (ex-Orbitz) which grew in the high single digits in the last two
quarters. The hotel direct booking campaigns appear to have little impact on the business, but Expedia did stop dimming results (reducing visibility
and content) for chains, given it hurts conversions.
Company Update:
• Outperforming Expectations; 2017 Targets Appear Achievable: Trivago, Orbitz, and HomeAway have outperformed our expectations both
on the top and bottom-lines. Last quarter Trivago grew revenue 57% y/y with a 2% adj. EBITDA as the company continues reinvesting to
expand penetration in new markets. We do not know the timing of a potential IPO but it could shift the profitability strategy or cause investors to
revalue the asset through a sum-of-the-parts analysis. The Orbitz transition is largely complete and we believe Expedia can apply its data
driven ad spending techniques to improve the long-term growth and profitability of this business. HomeAway has become a greater focus for
investors as the monetization opportunity and long-term margin expansion story could significantly impact Expedia’s consolidated business.
Management has highlighted that HomeAway will face more difficult growth comps next year with the roll out of service fees and flat
subscription model and indicated that margins might not be as strong as last quarter’s 35% figure due to increased investments and marketing.
However despite this commentary we believe the 2018 $350mm adj. EBITDA target appears achievable given the time the company has to
optimize and drive volumes through the platform.
• 3Q:16 Results: Room nights growth decelerated to 17% y/y, 11% y/y organic (versus 20% y/y and 12% y/y organic in 2Q:16), missing our 22%
y/y and 16% y/y estimates. Management noted that exiting September room nights growth was 20% y/y (14% y/y organic) with positive trends in
October. Bookings grew 21% y/y (8% y/y organic) to $18.6B, missing our $19.2B estimate as the core OTA bookings grew slower than
expected. Total revenue of $2.58B, growing 33% y/y (13% y/y organic), was in line with our $2.51B estimate driven strength in HomeAway and
Trivago revenue growth offsetting weaker than expected core OTA revenue growth. Adj. EBITDA of $667mm (31% of gross profit) was slightly
below our $687mm estimate but ahead of the street at $656mm. Management noted that the company expects to spend over $30mm on cloud
migration this year (tech and content) of which $20mm has already been recognized and expects this number to more than double next year.
Additionally, Expedia plans to ramp up spend in performance marketing channels which could pressure 4Q:16 margins.

33
GoDaddy (GDDY) – Hold, $33
GoDaddy 3Q Results Beat Forecasts; 4Q Guide Essentially Unchanged
GoDaddy came modestly above 3Q:16 revenue / adj. EBITDA expectations and raised its top-line outlook for the full year by less than 1%, while
leaving the previous adj. EBITDA guide in place. GoDaddy's performance was driven by broad execution across business segments, with Hosting
and Presence accelerating slightly (~16% y/y growth), though Business Applications decelerated more than expected (~36% y/y growth), which
management attributed to more difficult comps. Although growth in 3Q:16 appeared to be healthy, we think the decision to leave guidance effectively
in-tact may have been slightly disappointing to investors given 3Q numbers. We remain Hold rated as we continue to see balanced risk / reward in
the company’s shares.
3Q:16 Update:
• Solid 3Q results, guidance left essentially flat: GoDaddy beat consensus revenue / adj. EBITDA forecasts in 3Q:16 as the Hosting and
Presence segment accelerated slightly, though the higher-growth Business Applications segment decelerated at a faster rate than expected. The
Domains segment continued to benefit from international growth, healthy renewals, and greater activity in aftermarket domain sales. For the
Hosting and Presence segment, management said it rolled out 30-day trials of its Website Builder product more broadly in 3Q, and is seeing good
uptake in its security products, an offering category GoDaddy looks to expand. Business Applications decelerated to +36% y/y growth (from
+45% y/y in 2Q:16), with the company noting continued adoption of productivity and email marketing tools. Management reiterated that gross
margins are expected to normalize around current levels (an ~80bps deleverage y/y in 3Q to +64.2% of revenue) as GoDaddy laps incentives on
high-value products like Office 365 it began offering last year.
• 3Q:16 highlights: GoDaddy grew revenue +15% y/y (+16% ex-FX) to $472.1mm, topping consensus of $470.1mm and guidance for $468mm-
$471mm. Adj. EBITDA of $106.6mm beat the Street’s $104.7mm forecast and guidance for $102mm-$105mm. 4Q:16 guidance for revenue of
$483mm-$487mm was in line with the Street’s $485.1mm forecast at the midpoint. The company did not issue adj. EBITDA guidance for 4Q, but
reiterated the previously issued FY guide for $410mm-$416mm, implying 4Q adj. EBITDA of $87.3mm at the midpoint, below the Street’s
$90.8mm forecast, partially impacted by the company’s plans to invest in marketing dollars in 4Q that were not spent in 3Q.

34
MercadoLibre (MELI) – Hold, $185 PT
Resultados Impresionantes
MercadoLibre reported impressive 3Q:16 results as the company continues to execute its rollout of enhanced services across additional
geographies and drive ongoing momentum in the non-marketplace businesses (Pago, classifieds, ads). GMV increased 46% y/y FX-adj. (39% y/y
ex-Venezuela), revenue increased 66% y/y FX-adj. (61% y/y ex-Venezuela), and items sold grew 40% y/y behind increased selection due to
changes in pricing. Pago continues to deliver strong results as TPV increased 85% y/y FX-adj. and exceeded GMV for the first time. We raise our
2016/2017 revenue estimates though modestly reduce our margin expectations. Our price target moves to $185 from $180.
3Q:16 Update:
• Continued Top-line Momentum: GMV increased 46% y/y FX-adj. to $2.04B, ahead of our expectation of $1.87B. Items sold increased 40% y/y
(following a 45% y/y increase last quarter) as live listings were up 67% over the prior year to 70.4mm. The platform added 7.7mm new registered
users (7.1mm added last quarter), bringing the total to 159.3mm. Revenue of $231mm, up 66% y/y FX-adj. (73% y/y FX-adj. last quarter),
exceeded our $221mm estimate (60% y/y FX-adj.), driven by strength in both marketplace (71% y/y FX-adj.) and non-marketplace (60% y/y FX-
adj.). TPV of $2.11B increased 85% y/y FX-adj. (102% y/y FX-adj. last quarter). Pago penetration stands at roughly 75% on the platform (100% of
transactions in Brazil on Pago), adoption expands outside Brazil. EBIT margins of 23% declined from 27% last year (versus our 26% estimate)
due to investment in IT headcount and lower gross margin (down 320bps y/y) driven by further mix shift towards lower margin enhanced services
and investment in hosting/customer service.
• Beyond the Quarter: MercadoLibre has delivered a series of strong consecutive quarters and has a number of avenues to extend growth in the
coming quarters/years against more difficult comparisons. Enhanced services are nearing saturation in Brazil (Pago and Envios are 100% and
72% penetrated respectively) though continues to gain traction in Mexico and off-platform (merchant services). Pago is 76% penetrated in both
Mexico and Argentina. In Argentina there was some short-term dislocation as management made the decision to make Pago mandatory for all
transactions by quarter end. Roughly half of total items sold are now are through Envios (items shipped up 86% y/y). The company offered free
shipping in Mexico on transactions over $30 (first time in the company’s history at this scale). Merchant services remains one of the fastest
growing services increasing 101% y/y (6 consecutive quarters of triple-digit growth) highlighted by cross border strength. MercadoLibre’s
advertising and classified business continue to perform well growing 84% and 20% respectively. Management is executing well in expanding its
leadership position in the Latin America market.

35
Lending Club (LC) – Hold, $7 PT
Incentives Phased Out on Schedule
LendingClub reported better than expected 3Q:16 results as all the larger investors re-engaged with the platform (including all banks) and investor
incentives ended as planned, with the company using only half the anticipated level. Investors continued loan purchases following the conclusion of
incentives. Loan originations, net revenue and Adj. EBITDA all exceeded our and consensus expectations as well as company guidance.
LendingClub guided 4Q:16 above our and consensus forecasts as the company emerges from the worse of its recent issues and is positioning itself
for growth in 2017. We raised our estimates and our Price Target to $7.
3Q:16 Update:
• Stabilizing Growth, Narrowing Losses: Total originations for the third quarter grew ~1% y/y to $1.97B (up ~1% sequentially), above our
estimate of $1.96B ($1.95B consensus). Revenue of $112.6mm was also above our estimate of $99.7mm and above consensus forecasts of
$103.7mm. Incentives given to investors during July and August totaled $11mm, down from $14mm offered last quarter. Management noted the
company discontinued its incentives program at the end of August, in total using only half the incentive levels initially planned. All investors
continued purchases in September after the discontinuation. Adj. EBITDA loss of $11.1mm (-9.9% margin) exceeded our estimate for a loss of
$24.3mm and included a $1.7mm goodwill impairment, concluding the company’s goodwill test that was open at the end of last quarter.
Contribution income was $54.1mm (48% margin), versus $34.1mm in 2Q:16 which included unusual expenses such as severance costs and
legal, audit, due diligence, and PR services. Management guided 4Q:16 originations sequentially flat at $2.0B, slightly above our $1.96B
estimate. However, the company guided operating revenue to $116mm-$123mm (versus our $114mm estimate) and Adj. EBITDA loss to
$15mm-$5mm (versus our $17.2mm estimated loss), both considerably above our estimates as incentives rolled off earlier than we anticipated.
• Beyond the Quarter: LendingClub is beginning to lay the foundation for growth with banks ramping up activity on the platform, the new
partnership with Credigy, and the launch of the auto financing product. As of November all the banks are back on the platform, but will take time
to ramp up their loan purchases to prior levels. Management aims to increase banks funding mix to 25% of originations in 4Q, up from 15% in
September 2016. During the quarter the company received approval from the National Bank of Canada (Credigy is the U.S. subsidiary) for $1.3B
of capital to be deployed through the platform over the next year. Approximately $325mm of the committed capital will be deployed over the next
three months. We view this partnership as a positive indicator that the platform can attract stickier capital from a diversified base of investors over
the long term. Announced in October, LendingClub has started expanding into the auto financing vertical through secured loans and is beginning
with prime loans first. Management expects the learning and ramping process will take 6-12 months as the offering expands to new states
beyond California. Overall, we are constructive on where the business is headed, but await more visibility into 2017 as the new management
team begins positioning the company for profitable growth.

36
LinkedIn Corp (LNKD) – Hold, $196 PT
LinkedIn 3Q:16 Earnings Results
LinkedIn reported its 3Q16 results on 10/27. Due to its pending acquisition by Microsoft (expected to close prior to the end of 2016), LinkedIn did not
update its 2016 outlook or host a conference call to discuss its results. We leave our last published forward estimates unchanged while updating our
model for 3Q results. We maintain our Hold rating on LNKD shares.
3Q:16 Update:
• 3Q:16 results: LinkedIn's total revenue grew +23% y/y to $960mm, from $933mm in 2Q. Talent Solutions grew +24% y/y (vs. +35% in 2Q),
Marketing Solutions grew +26% y/y (vs. +29% in 2Q), and Premium Subscriptions grew +17% y/y (vs. 21% in 2Q). LinkedIn generated adjusted
EBITDA of $304mm (~32% margin, up from 31% margin last quarter). Non-GAAP EPS was $1.18, from $1.13 last quarter. LinkedIn's member
base grew in-line with last quarter (+18% y/y) to reach a cumulative registered member count of 467mm (from 450mm last quarter); monthly
unique visitors grew +6% y/y to 106mm. Member page views grew +27% y/y and page views per member grew +20% y/y. LinkedIn's migration to
mobile continued in 3Q with mobile visits now accounting for over 60% of all traffic.

37
RetailMeNot (SALE) – Hold, $9 PT
Source: Company reports, Stifel estimates, comScore
Shares Now More Reasonably Valued for Ongoing Growth Challenges; Upgrade to Hold
This morning RetailMeNot reported 3Q:16 results delivering revenue below our estimates and Adj. EBITDA above our and consensus expectations
primarily due to lower than expected sales and marketing spend in the quarter. Following 3Q:16 results we are raising our rating on RetailMeNot
shares to Hold from Sell as shares have reached our price target. We believe management is focused on the right areas to reinvigorate growth from
the integration of new products/verticals, better attribution tools, and new UI features. However we believe that challenges remain in returning the
business to sustainable growth as traffic continues to shift to lower monetizing mobile devices. We are maintaining our $9 price target.
3Q:16 Update:
• Lower Top-line, Better Margins: Revenue of $64.6mm was below our consensus-matching estimate of $66.8mm expectation in-line with
guidance of $61.5mm-$69.5mm. We had reduced our revenue estimates intra-quarter following weaker third-party traffic data. Desktop
transaction revenue declined 17% y/y, following an 11% y/y decline last quarter, in-line with our estimate. Desktop visits declined 17% y/y
following a decline of 13% y/y last quarter. Desktop net revenue per visit was flat y/y at $0.39. Mobile online transaction revenue increased 13%
y/y decelerating sequentially from the prior quarter’s 18% y/y growth. Mobile visits increased 3% y/y, better than a 2% increase last quarter. Net
revenue per mobile visit increased a penny y/y to $0.08. A Google algorithm change resulted in some SEO choppiness in the quarter (though not
as bad as historical algo changes). Adj. EBITDA of $9.8mm (15% margin) exceeded our $6.8mm estimate ($7.7mm consensus estimate) ahead
of the high-end of guidance of $9.0. During the quarter the company repurchased 577K shares at an average price of $9.19 for a total of $5.3mm.
• Beyond the Quarter: RetailMeNot continues to face growth headwinds during its transition to mobile, but has exercised expense discipline that
may stabilize Adj. EBITDA margins. Management has outlined three key priorities necessary to revitalize core top-line growth: (1) stabilize the
declining desktop business, (2) deliver greater customer value through new offers/verticals (bundles, food & dining), and (3) improve attribution
and incremental sales driven to partners. The desktop business presents the most difficult challenge as it still composes 53% of traffic and
monetizes over 4x higher than mobile traffic. New products and verticals should be able to drive greater user engagement over time. Retailers
have been reducing their promotional budgets, but the recently launched attribution report may better illustrate the value of the platform as a key
marketing channel. We believe the company has a clear plan to engage customers and drive greater value to partners, however visibility remains
limited while current headwinds persist.

38
Wayfair (W) – Hold, $35 PT
3Q:16 Results Ahead; Investments and Macro Pushing Out Profitability Expectations
Wayfair reported stronger than expected revenue growth and narrower adj. EBITDA losses in 3Q:16, though it guided 4Q:16 direct revenue growth
to 30%-35% y/y and adj. EBITDA margin to (2.75)%-(3.25)%, both below our and consensus expectations. Active users, up an impressive 60% y/y,
drove direct retail revenue growth of 53% y/y against a difficult compare. The adj. EBITDA loss was better than expected. However, fixed
investments combined with the moderated growth outlook pushed the previous expectation for breakeven further out. We believe Wayfair continues
to execute well on the domestic front and has multiple growth avenues, particularly in wedding registry, private label, and seasonal/new categories.
Increased investments in international operations, logistics, and new services against a moderating macroeconomic backdrop keep us cautious as
growth decelerates. Until we have greater visibility into the returns on current investments, we remain Hold rated with a $35 Price Target.
3Q:16 Update:
• 3Q:16 Results: Wayfair reported 45% y/y revenue growth to $862mm, $18.4mm above our estimate. The direct retail business grew 53% y/y,
down sequentially from 72% y/y growth last quarter against a more difficult comp (91% y/y in 3Q:15 versus 81% in 2Q:15). Active customer
additions increased to 7.4mm, as 690K net new customers were added in the quarter (up from 598K last quarter). Customer repeat rate of 56.9%
was down from 57.6% last quarter though up from 55.2% in the prior year. Adj. EBITDA margin of (3.6)% was above our / consensus estimates of
(4.3)% / (4.2)% and the high-end of guidance of (4.25)%-(4.75)%. Gross margin of 23.4% was in line with our estimate and the target margin of
mid-23%. Management noted that the company’s private label brands now account for one-third of Wayfair.com revenue, up from mid-single-
digits roughly 18 months ago. Advertising spend as a percent of revenue improved 14bp y/y to 11.8% of revenue, roughly in line with our
expectation. Investments in both domestic and international headcount (212 net new employees added in 3Q, up 73% y/y), and to a lesser extent
logistics and new services, continued to pressure margins this quarter
• Beyond the Quarter: Management guided 4Q:16 direct retail revenue growth to 30%-35% y/y against a difficult compare (98% growth in 4Q:15)
and indicated that growth QTD is tracking above the guidance at close to 40% growth (4Q is largely back-half weighted). We note that the total
revenue guide of $920-$960mm was below our $1.02B estimate and Street expectations of $1.03B. Management highlighted macro concerns as
a key driver of the conservative guidance range. Adj. EBITDA margins were also guided below our and consensus expectations to (2.75)%-
(3.25)%, driven by elevated investments in the logistics and international expansion. Last quarter Wayfair mentioned the possibility for breakeven
margins in 4Q:16, but given the reduced growth expectations against a fixed investment base, management lowered the profitability outlook given
there are no plans to re-scale investments. Much of the headcount additions associated with new services have been completed. Wayfair is
making progress with its initiatives in logistics (10% of revenue next day or 2-day delivery and ramping quickly) and registry (12K registries
created since September launch, though the category is not expected to contribute meaningfully to revenue until summer 2017), and we see
good possibility for successful outcomes over time. The debate surrounding international investment remains uncertain. We remain on the
sidelines, given the tempering macro backdrop and limited visibility into its impact on the business, while the company progresses through its
investment cycle.

39
Yelp (YELP) – Hold, $42 PT
Yelp Posts Strong 3Q Local Ad Growth, Doubles Down on Domestic Business
Yelp beat 3Q:16 revenue / adj. EBITDA expectations as Local Advertising revenue growth held steady at 2Q levels and profitability surprised to the
upside. Yelp admitted its international strategy has not worked out as planned and will scale back its investments outside of the U.S. and Canada
moving forward, and the company will reallocate those resources toward its biggest domestic priorities. Yelp’s domestic business has posted solid
results for the 3rd straight quarter, but we continue to view its success as relatively priced-in at current levels. We maintain our Hold rating on Yelp
shares and have raised our Price Target to $42.
3Q:16 Update:
• Local ad momentum drives upside to 3Q revenue, profitability forecasts: Yelp topped consensus revenue / adj. EBITDA forecasts by ~2% /
~30% as the company’s momentum in its Local Advertising business continued and margins benefited from growth in self-serve advertising
(more than doubled y/y, accelerated from 2Q levels) and growing contributions from existing national / multi-location advertisers (existing clients
were responsible for 70%-80% of total national revenue growth). The company’s Request-a-Quote feature, a potentially game-changing
innovation for home & local services (and eventually other types businesses), saw volume grow an impressive +20% q/q. Yelp noted its
awareness, consideration, and brand familiarity are at the highest levels the company has ever seen due to successful marketing initiatives, and
Yelp is currently evaluating investing in direct response campaigns to further stimulate consumer traffic / transactions on the Yelp platform.
• Despite recent successes in Yelp’s domestic business, the company admitted its international strategy has struggled due to changes in the
international distribution environment (i.e., Yelp’s brand may not be strong enough internationally to overcome Google’s favorable treatment of its
own local business reviews / recommendations). Yelp plans to wind down all sales and marketing activities outside the U.S. and Canada, which
could result in as many as 175 employees (~4% of Yelp’s total headcount) being let go. Yelp anticipates one-time restructuring charges of $2mm-
$4mm in 4Q, though only about 1% of Yelp’s revenue (~$5mm YTD) is derived from the affected regions. Yelp plans to reinvest the eventual
savings into core domestic initiatives like driving engagement with consumer / business owner apps, further expanding its transactions
functionality, and stepping up its brand / performance marketing investments.
• 3Q:16 highlights: Total revenue grew +30% y/y for the second straight quarter to reach $186mm, above guidance of $180mm-$184mm and
consensus of $183mm. Adj. EBITDA was $34mm (~18% margin) vs. guidance of $24mm-$28mm and consensus of $28mm. Local Advertising
revenue grew +41% y/y for the second straight quarter and Yelp added ~6,600 net Local Advertising accounts in the quarter, down slightly from
7,400 net adds in 2Q16 and 7,100 in 3Q:15. Transactions revenue decelerated to +33% y/y growth (from +37% in 2Q16) as growth in Eat24
remains healthy but may have fallen below GrubHub’s organic growth rate (+35% y/y) for the first time since Yelp acquired the platform. Yelp's
4Q:16 revenue guidance of $191mm-$195mm bracketed consensus of $193mm, as did adj. EBITDA guidance of $36mm-$40mm (vs. consensus
of $37mm).

40
Zalando (ZAL-DE) – Hold, €37 PT
Investing in Tech and Logistics to Drive Long-term Customer Value
Zalando's 3Q revenue / adj. EBIT came roughly in-line / slightly above the midpoints of the pre-announced ranges provided in October. The
company reiterated its previous 2016 sales growth target (at the upper end of 20%-25% y/y range) and reaffirmed its 2016 adj. EBIT margin target
(5.0%-6.0%) which was increased in October (from 4.0%-5.5%). The company continues to maintain strong, profitable growth, as demonstrated by
the increased adj. EBIT margin outlook for 2016. We remain constructive on Zalando’s growing platform and view investments in distribution
infrastructure and technology headcount favorably. However, we believe shares accurately reflect a balanced risk / reward profile at current levels
(~23x EV / 2017 adj. EBITDA) as of 11/10.
3Q:16 Update:
• 3Q:16 Recap: Active customers grew 12% y/y to 19.2mm, below our 19.6mm estimate and decelerating from 15% y/y in 2Q:16. LTM average
orders per active customer increased to 3.4, an all-time high, and average basket remained roughly stable at €63, down €0.5 y/y as customers
continue to make more frequent, though smaller, purchases. Mobile traffic continues to gain share of total traffic, now accounting for 67% of
total visits, 230bps greater than last quarter. Management highlighted that the majority of customer orders are now placed through mobile
devices, reaching over 50% of share of total orders in 3Q. DACH posted revenue growth of 10% y/y to €407mm, though it continues to
decelerate gradually (15% growth last quarter). The Rest of Europe segment grew revenue 24% y/y to €374mm, decelerating from 34% y/y
growth last quarter. Total revenue, up 17% y/y to €835mm, hit the middle of the pre-released range. Gross margins expanded 80bps y/y to
41.2%. Adj. EBIT of €19.5mm (2.3% margin) was slightly above the mid-point of the pre-announced range and above our €11.1mm expectation
(1.3% margin), as a result of increased operating leverage.
 Beyond the Quarter: Lower than recent trend revenue growth in the quarter, against a difficult compare, stemmed from a later start to the
season resulting in a weak fashion market particularly in Germany in September. Management commented that it hasn’t seen anything alarming
from a consumer standpoint that is cause for concern heading into the holiday season. In addition, there was a 2 point hit to revenue growth in
the DACH region from the Partner Program. We expect revenue growth to rebound resulting in annual growth in-line with the target 20%-25%
corridor. Overall, we believe Zalando is investing in a number of key areas (including logistics, brand, and technology) that will allow the
company to expand its competitive advantages and to continue capturing market share. So far through this investment cycle the company has
expanded margins through operational efficiencies. While investment will continue through 2017, we see an avenue to higher profitability
through the strong possibility of successful outcomes of investment initiatives. Valuation keeps us Hold rated as shares trade at ~23x 2017 adj.
EBITDA as of 11/10.

42
TripAdvisor (TRIP) – Sell, $47 PT
Transition Pushed Out Another Year, Reiterate Sell
On 11/10, TripAdvisor hosted its 3Q:16 earnings call, though management provided few updates incremental to its earnings release. TripAdvisor
missed our and consensus 3Q:16 revenue and adj. EBITDA estimates, as Hotel revenue contracted 6% y/y and Non-Hotel revenue grew below
expectations at 35% y/y. Following management's commentary that 2017 adj. EBITDA margin levels will likely be lower than 2016 margins (due
primarily to ongoing sales and marketing deleverage), we are materially lowering our 2017 forecast. We remain skeptical that the transition will be
as smooth or as fast as management has communicated and reiterate our Sell rating, lowering our Price Target to $47 from $53
3Q:16 Update:
• Incremental Updates From the Call: The company provided limited additional insight beyond the prepared remarks, though commentary
included: (1) Management believes IB desktop revenue in the U.S. is now at revenue parity with metasearch as conversions improve on a y/y
basis, though international lags in monetization due to a later rollout date; (2) Total revenue saw a ~200bp y/y growth benefit from the seasonal
impact of deferred revenue being recognized, which was offset by a ~200bp FX headwind; (3) The transition to mobile has happened faster
than expected and remains a headwind to monetization, and management noted that mobile monetizes at roughly 30% the rate of desktop,
deteriorating slightly from roughly one-third last quarter; and (4) Mobile traffic is split roughly 50/50 by app/mobile web, from 40/60 in 2Q:16,
while overall traffic is split 60/40 by desktop + tablet/mobile. This mix is generally more favorable than other travel companies because app
traffic is organic.
• TripAdvisor Continues to Face Transition Issues: We are maintaining our Sell rating and reducing our price target to $47 following a
reduction in our estimates. Overall we believe that TripAdvisor’s transition to Instant Booking will continue to face headwinds that could extend
longer than previously believed and may take longer than expected to achieve a positive impact on financials. In particular the transition to
mobile will continue to provide a near-term drag on monetization, as outlined by management. We also remain cautious on the total revenue
accretion from the business model shift given that U.S. desktop monetization has only just reached revenue parity after over a year of being
rolled out. Additionally, management noted 2017 Adj. EBITDA margins will be down y/y, below our and consensus prior expectations, as the
company engages in more paid traffic, suggesting the transition will take longer than expectations. TripAdvisor completed phase 2 of the IB
initiative last quarter and has begun phase 3 focused on improving the user experience to improve conversion. Phase 4 of the transition which
involves educating the consumer on the feature could take time given the episodic nature of travel. With limited visibility into the timing and the
potential outcome of this multi-year transition we are maintaining our negative stance.

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