The shares dropped 3.7 percent to $207.56, the lowest intraday price since June 13, before trading at $208.50, down 3.3 percent, at 10:46 a.m. in New York on Tuesday. The shares stretched losses for a fourth day in a row.
Bernstein lowered Netflix to "underperform" from "market perform", saying current valuation reflects "unrealistic expectations".
“We believe Netflix will grow its subs, expand its margins and be able to replicate its business internationally. However, we also believe its current valuation reflects unrealistic expectations across all major economic levers of the business,” Bernstein analysts Carlos Kirjner and Ram Parameswaran wrote in a note to clients.
The analysts set a new price target of $180 from an old target of $125.
The current stock price reflects at least 50 million streaming subscribers in the U.S. in a year while Bernstein analysts predict the number of domestic subscribers to rise to just 43 million in a year in a steady state.
"We think the limits imposed by the actual size of Netflix's truly addressable domestic market, growing competition, and diminishing returns on incremental content investment will become clear in 2014," the analysts wrote.
Netflix shares have gained 128 percent since the beginning of the year through Monday, outpacing a 10 percent gain by the Nasdaq Composite (INDEXNASDAQ:.IXIC).