Shares of Netflix Inc. slipped Tuesday ahead of the company's quarterly report after an analyst said online video sites like YouTube and Hulu could pose a threat to the online movie rental company in the coming months and years.
Lazard Capital Markets analyst Barton Crockett cited "new competitive challenges" for Netflix when he started coverage of the company with a "Sell" rating and a target price of $34.
Netflix, the analyst noted, has "answered the long-term online threat to its core DVD by mail service with Watch Instantly, a streaming feature that has driven a renaissance in subscriber growth."
Netflix subscribers are able to watch thousands of movies and television shows streamed instantly to their computers or TV screens through set-top boxes such as Microsoft Corp.'s Xbox 360 video game console, DVD players and other gadgets. The company surpassed 10 million subscribers in February.
Crockett, however, expects Netflix's "streaming edge" to be "be meaningfully eroded in coming months and years by (Google Inc.'s YouTube), as well as by the improving Hulu service."
Netflix charges a monthly subscriber fee for its DVD-by-mail service, which also includes streaming some of its content. Its most popular plans range from $9 to $17 per month. Sites like Hulu.com, meanwhile, are free to use but include short commercials in the TV shows and movies they show.
Shares of Los Gatos, Calif.-based Netflix, which is scheduled to report its first-quarter results Thursday, fell $2.99, or 6 percent, to $46.62 in afternoon trading. The stock has traded in a 52-week range of $17.90 to $50.24.