higher-than-expected International investments. The biggest downside risk is lower

higher-than-expected International investments. The biggest downside risk is lower revenue if Tinder experiences a decline in popularity or public perception. Netflix, Inc. (NFLX) Our $154 price objective is based on a peak penetration sum-of-the-parts analysis which discounts back future EPS at peak penetration by 10%. At peak penetration, we assume domestic streams peak at 65mn subscribers in five years while the international segment reaches 200mn seven years later. We assume APRU of $9.99 and 40% contribution margins for the domestic business and a $8.50 APRU and 40% contribution margin for the international business. We also assume a $1.50 price increase domestically over six years and a $3.60 price increase internationally over twelve years which will be 75% incremental to operating income. We assume a US tax rate of 40% and an international tax rate of 25%. At peak penetration, we assume a 15x S&P average multiple. Downside risks to our price objective are: 1) increasing content costs, 2) potential new competitors in the company's streaming business, 3) execution challenges and competition potentially limiting growth in new markets, 4) U.S. saturation point approaching quicker than expected, and 5) net neutrality repeal causing ISPs to look to recoup higher rents from Netflix's high bandwidth requirements for streaming. Upside risks to our price objective are: 1) content costs rising slower than expected, 2) total subscriber growth is faster than expected, and 3) international expansion into new large markets (e.g. China). OnDeck Capital (ONDK) Our $6 price objective is based on 10x our 2018E EBITDA. This is below the internet ecommerce comparable group (11x) which is justified in our view given OnDeck's double digit revenue growth and potential to expand margins starting in 2018 as it gains scale and operating leverage, but tempered by a slower FY18. Upside risks to our PO are: 1) faster than expected originations growth, 2} signing of new large strategic partners, and 3) lower than expected operating expenses. Downside risks to our PO are: 1) higher than expected loss rates from worsening macro environment, 2) credit market freeze shutting down liquidity access, 3) lower effective yield from competition, and 4) increased marketing spend. Pandora Media, Inc. (P) Our $9 price objective is based on 1x our 2018 revenue estimate, a significant discount to online media and subscription service peers, but justified in our view as the multiple takes into account the company's difficult transition to a subscription on-demand service and lack of near term profitability balanced by the value of its data and user base. Upside risks to our PO are: 1) direct licensing agreements for lower royalty rates, 2) international expansion announcements, 3) ad-load increases in key demos, increasing monetization rates, 4) faster than expected launch of on-demand service, and 5) the company is acquired. Downside risks to our PO are: 1) emerging competition from both other Internet models like Spotify and Apple Music, as well as large, established radio companies like iHeartMedia embracing Internet streaming, 2) slow down in the company's ability to grow monetization, 3) lack of historical or near-term GAAP profitability, and 4) delayed on-demand service launch BankofAmerica <2” 56 Internet/e-Commerce | 06 April 2017 Merrill Lynch HOUSE_OVERSIGHT_014942