EQUITY RESEARCH MORNING RESEARCH SUMMARY January 16, 2015 What's Inside Focus Items Estimates & PT Revisions Global Payments Inc. (GPN) Glenn Greene, CFA ­ BJRI O BJ's Restaurants Inc. Raise PT Again Following Management Meetings C O ¯ Citigroup Inc. CG O ¯ Carlyle Group L.P. Verint Systems (VRNT) Shaul Eyal FIG O ­ Fortress Investment Group Double-Digit Grower; KANA & Cyber Expand TAM ­ GPN O Global Payments Inc. BlackBerry (BBRY) Andrew Uerkwitz HAIN P ¯ Hain Celestial Group, Inc. BBRY Management Meeting Takeaway INTC P ¯ Intel Corp. PODD O ¯ Insulet Corp. INTERNET Manish Hemrajani WWAV O ¯ WhiteWave Foods Company Expedia Buying Travelocity? Insulet Corp. (PODD) Steven Lichtman Updates Lower '14E New US Patient Adds; Lowering Price Target APO P Apollo Global Management BBRY P BlackBerry CONSUMER Rupesh Parikh, CFA BX P The Blackstone Group ICR Takeaways: Still A Favorable Demand Backdrop For Natural/ KKR O KKR & Co. Organic PCLN O The Priceline Group Inc. FINANCIAL INSTITUTIONS Chris Kotowski PLCE O The Childrens Place Printing Cash: Our 2015 Outlook SLB O Schlumberger Limited VRNT O Verint Systems Other Headlines Estimates/Ratings/Price Target Updates The Priceline Group Inc. (PCLN) Manish Hemrajani Annual Estimates Priceline Launches Last-Minute Booking App, Booking Now Current FY Next FY Ratings Price Targets COMMUNICATION AND CLOUD Timothy Horan, CFA Company Ticker Prev Curr Prev Curr Prev Curr Prev Curr Daily Datatimes, January 16, 2015 Intel Corp. (INTC) Rick Schafer BJ's BJRI 0.93 0.95 1.22 1.22 O O $56.00 $56.00 Restaurants Inc. Mobility Efforts Progressing, Though Profitability Remains Out on the Horizon Carlyle Group CG -- -- -- -- O O $38.00 $37.00 L.P. TECHNOLOGY Rick Schafer Citigroup Inc. C 5.51 5.34 6.02 5.87 O O $70.00 $67.00 Daily Chip Clips Fortress FIG 0.92 0.90 0.95 0.93 O O $12.00 $14.00 Investment Group The Childrens Place (PLCE) Anna Andreeva Global GPN 4.79 4.79 5.35 5.35 O O $90.00 $100.00 TGT Canada Stores Closing—Read Opportunity for PLCE/CRI Payments Inc. Hain Celestial HAIN 1.91 1.88 2.20 2.15 P P $60.00 $60.00 BJ's Restaurants Inc. (BJRI) Brian Bittner, CFA Group, Inc. Margin Upside In Early Stages; Reiterate Outperform Insulet Corp. PODD (0.17) (0.17) 0.21 0.07 O O $50.00 $39.00 Intel Corp. INTC 2.30 2.26 2.40 2.45 P P NA NA Oppenheimer & Co. Inc. 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. See "Important Disclosures and Certifications" section at the end of this report for important disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report, where applicable. Oppenheimer & Co Inc. 85 Broad Street, New York, NY 10004 Tel: 212-885-4646 Fax: 212-856-3989 Morning Summary - January 16, 2015 WhiteWave WWAV 0.99 0.99 1.18 1.15 O O $43.00 $40.00 Schlumberger Limited (SLB) James Schumm Foods Company Q4 Beats (After a Lot of Noise) Citigroup Inc. (C) Chris Kotowski Soft Quarter, But Management Firm on 2015 Outlook 2 Morning Summary -January 16, 2015 Snap Commentaries - Equities Updates Glenn Greene, CFA TECHNOLOGY 312 360-5942 Global Payments Inc. (GPN - $84.70) Financial Technology & IT Services Rating Market Cap Price Target / Prior Earnings Type 2014A 2015E 2016E O $5,680.0M $100.00 / $90.00 EPS 4.12 4.79 5.35 Raise PT Again Following Management Meetings After recently meeting with GPN, we remain optimistic regarding its growth/profitability prospects. We believe GPN has strong earnings visibility for the foreseeable future (likely through at least FY16). We would not preclude FY15 guidance proving conservative, despite perhaps 300bps of FX-related EPS growth headwinds. Operating margins (despite FX), with benefit from a much improved US business mix, stable Canada, and int'l expansion, appear on a steady expansion trajectory. Recently closed/announced M&A deals should provide incremental growth/margin benefits, and we wouldn't preclude add'l (albeit smaller) M&A near term. We also anticipate a somewhat accelerated pace of share repurchases near term. Macro factors aside, GPN is clicking on most cylinders. We raise our PT to $100 (from $90). Shaul Eyal TECHNOLOGY 212-667-8411 Verint Systems (VRNT - $54.08) Communication Software Rating Market Cap Price Target Earnings Type 2013A 2014E 2015E O $3,283.4M $70.00 EPS 2.84 3.42 3.76 Double-Digit Grower; KANA & Cyber Expand TAM On 1/15/15, we met with VRNT senior management. Verint offers advanced technologies, domain expertise and customer-centric services to capture structured and unstructured data, to process and analyze this data and to generate actionable insights across multiple domains. VRNT targets double-digit top-line growth and steady margin expansion (op margins currently in the low 20%s) and is expanding its total addressable market (TAM) by leveraging its core capabilities into new opportunities. VRNT is executing well, and demand is strong as customers seek product suites from an increasingly selective vendor roster. We reiterate our Outperform and $70 target (17x our FY16E EPS of $4.13). 3 Morning Summary -January 16, 2015 Andrew Uerkwitz TECHNOLOGY 212 667-5316 BlackBerry (BBRY - $10.11) Emerging Technologies and Services Rating Market Cap Price Target Earnings Type 2014A 2015E 2016E P $5,340.6M NA EPS (1.35) (0.18) (0.36) BBRY Management Meeting Takeaway We had the opportunity to meet with Blackberry CFO James Yersh. The hot topics were recent press speculation, pathway to software revenue, and opportunities for QNX. Management denied the speculation of a takeout bid by reiterating the press release yesterday (1/14). Mgmt said it has plenty of liquidity, is steadfast in its execution of the strategy, but spoke of the value of its assets (expertise in security and IP). We believe there is potential interest in Blackberry as a target but do not expect anything immediate. We came away more confident in the company's ability to execute its software strategy but remain cautious on the hardware segment. We leave our estimates unchanged, including below- consensus handset expectations. INTERNET Manish Hemrajani 212 667-5407 Expedia Buying Travelocity? Yesterday the FTC in a very terse statement posted on www.ftc.gov granted an Early Termination notice to Sabre and Expedia on their Hart Scott Rodino (HSR) filing with the acquired entity being Travelocity (see Appendix 1 of our full report, released today). Barring any press release from either company, we can only opine on the probability that Expedia is in the process of acquiring the entire Travelocity asset. Indeed, if that is the case we view this development as a positive for both SABR and EXPE. It helps SABR delever its balance sheet further and takes a non-core asset out of focus. EXPE gains further market share in the US (~58%) and four more quarters of inorganic boost to its revenue growth. We estimate the potential deal to be 6-8x estimated EBITDA of $40M for Travelocity. Maintain Outperform on EXPE ($92 target) and SABR ($22 target). Steven Lichtman HEALTHCARE 212-667-8160 Insulet Corp. (PODD - $31.86) Medical Devices Rating Market Cap Price Target / Prior Earnings Type 2014E 2015E / Prior O $1,786.8M $39.00 / $50.00 EPS -- (0.17) 0.07 / 0.21 Lower '14E New US Patient Adds; Lowering Price Target ‎Comments by PODD this week on '14 results indicated that US diabetes growth, particularly new patient adds, was lower than Street estimates. New patient adds declined ~9% following a 30% increase in '13 on the next-gen Omnipod launch. We estimate '14 US OmniPod revs grew 16%. International was the offset and OUS revs doubled in '14. Early indications on FY15 imply mid-teens top-line guidance (vs. our previous 23-24%). There may be some new management conservatism embedded and there are potential accelerators including increased sales/ marketing investment and AMGN/Neulasta launch in '15 and a new handheld launch/CGM connectivity and Type 2 pump launch in '16. Near term, the story is in show-me stage as new management begins executing its plan. 4 Morning Summary -January 16, 2015 CONSUMER Rupesh Parikh, CFA 212 667-5263 ICR Takeaways: Still A Favorable Demand Backdrop For Natural/Organic Earlier this week, we spent time and/or attended company events for FWM, HAIN, STKL, and UNFI at ICR. The focus of today's brief update is primarily on our food coverage universe. We walked away with a still positive outlook toward demand drivers for the natural/organic space. Increasing consumer awareness toward healthy eating, retailer interest in the category and product innovation are likely to sustain organic growth rates amongst the highest within the food space. With peakish valuations in some names, moderating announced M&A activity and growing FX headwinds, we believe investors need to be more selective than in recent years. In the food/grocery space, our top picks remain WFM, UNFI and KR. We still look favorably on WWAV, but expect FX and supply challenges in organic dairy to limit upside near term. We would be more constructive on HAIN and SFM shares on a pullback. FINANCIAL INSTITUTIONS Chris Kotowski 212 667-6699 Printing Cash: Our 2015 Outlook Referring to the private equity-based asset managers at their December investor day, Apollo CFO Martin Kelly noted, "These things print cash and you can ignore it only for so long.