Netflix (NFLX) Gets Hit With a Trifecta of Downgrades

Netflix Inc. (NASDAQ: NFLX) shares are falling on Friday, following downgrades on the movie-rental service company's stock by three firms in the last 24-hours citing that the shares have hit fair value and are growing too high to fast.

The shares have nearly doubled since the beginning of the year and are nearly triple the value of this time last year.

Brian Fitzgerald, analyst for UBS said that the firm has downgraded Netflix to Sell from Neutral with a price target of $90 saying that the company's DVD/streaming model in fundamentally sound, but the stock value saw a premium for an acquisition that they do not feel will occur anytime soon.

There had been speculation that Netflix could be acquired by Amazon.com Inc. (NASDAQ: AMZN), but Fitzgerald said that "the largest obstacle to an AMZN/NFLX deal could be the issue around state taxation for items sold on AMZN."

Citi analyst Mark Mahaney agreed to the premium on the stock’s value caused by a potential acquisition, but added that there may be some headwinds in the economics of digital streaming.

"We see the risk-reward as less compelling," Mahaney said. "We continue to view Netflix as a Core Internet Holding and believe the recent share price surge is well justified. We would be aggressive buyers on any material pullback in Netflix shares."

Citi downgraded Netflix to Hold from Buy on Friday with a price target of $110.

Eric Wold, analyst at Merrimn Curhan Ford downgraded Netflix to Neutral as there is a need to wait for a more attractive entry point, and recommended a swap into shares of Coinstar Inc. (NASDAQ: CSTR), which operates Redbox DVD rental kiosks.

Wold remains optimistic on the company as there are growth opportunities for its streaming services, which have a higher margin, and the numerous international expansion opportunities going forward.

"With less than 15 percent of U.S. households currently subscribing to Netflix, the accelerating closure of physical rental store chain," both led Wold to remain optimistic on the company.

Netflix as helped lead the onslaught on former rental giant Blockbuster Inc. (NYSE: BBI), which posted disappointing results for the first quarter.

Shares of Netflix are down 8.40 percent to $100.70 in late market movement on Friday.

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