UBS is getting less bullish over Netflix shares after the stock’s stunning rally this year.
The firm lowered its rating to neutral from buy for Netflix shares, citing the internet company’s high valuation.
“We believe Netflix’s core competencies in both content & tech should drive a virtuous circle of greater subs and increased viewing time, broadening its moat for global leadership in SVOD,” analyst Eric Sheridan said in a note to clients Wednesday. “It’s all priced in … While we remain constructive on the business LT, we view the stock as a less compelling (& roughly equal) risk/reward at current levels, pricing in 5 yrs of excellent forward operating performance while likely underestimating risk factors from competition, FCF burn, & dependence on capital markets for content spending goals.”
Netflix shares are down 0.6 percent in Thursday’s premarket session. The company’s stock is the best-performing member of the S&P 500 this year. It’s up 118 percent year to date through Wednesday versus the market’s 4 percent return.
Sheridan still raised his price target to $425 from $375 for Netflix shares, representing 2 percent upside to Wednesday’s close.
Netflix did not immediately respond to a request for comment.