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Surging Netflix stock is downgraded amid worries over its valuation

Key Points
  • Stifel lowers its rating for Netflix shares to hold from buy, citing concerns the company's stock price has gone up too far.
  • "We are attracted to Netflix's business and competitive position but believe share price may have sprinted ahead of fundamentals in the short-term," the firm says.
Reed Hastings, chief executive officer of Netflix Inc.
Akio Kon | Bloomberg | Getty Images

One brave Wall Street analyst is getting less bullish on Netflix shares after their stunning rise this year.

Stifel reduced its rating for Netflix to hold from buy, citing concerns over the company's valuation.

"We are attracted to Netflix's business and competitive position but believe share price may have sprinted ahead of fundamentals in the short-term," analyst Scott Devitt said in n note to clients Tuesday.

Netflix shares declined 1.3 percent Wednesday after the report. The company's shares rose 69 percent so far this year through Tuesday.

Devitt raised his price target for Netflix shares to $325 from $283, roughly even to Tuesday's close.

The analyst said he is still optimistic about the streaming giant's business over the long run.

"We believe share price outperformance over the next several quarters may be more difficult to achieve given the recent run and increasing expectations. That said, Netflix has built a dominant streaming and content franchise and we continue to like the company's long-term prospects," he wrote.

On the flip side, UBS and Macquarie on Monday raised their price targets on Netflix, citing its strong content and increased adoption of 4K ultra-high-definition television.

— CNBC's Michael Bloom contributed to this story.

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