Netflix shares closed down three per cent last night after a broker slashed its rating for the streaming service amid growing competition.
Laura Martin, media and internet analyst at Needham, downgraded Netflix from “hold” to “underperform”, predicting that the service will lose 4m US subscribers in 2020 as new rivals enter the market.
Shares dropped 3.1 per cent to $293.12 following the comments.
To ward off competition, Martin recommended that Netflix offer a second, lower priced service to compete with similar services from Apple and Disney. “Netflix’s premium price of $9 (£7) to $16 per month is unsustainable,” she said.
Martin also criticised the service for refusing to allow advertising on its platform. She said: “We downgrade Netflix because it has consistently stated it will not have advertising, which we believe will result in US subscriber losses.”
Netflix had over 60m paying subscribers in the US at the end of September, accounting for over a third of its 180m global subscribers.
The Silicon Valley firm has made huge investments in its content and its subscriber numbers far outweigh those on rival platforms.
However, investors are worried by rising debts. Netflix had a debt pile of $12.4bn as of 30 September.
The downgrading comes after Netflix dominated Golden Globe nominations, with a total of 34 nominations and four films up for best picture prizes.
Over 26m Netflix accounts watched Martin Scorsese’s gangster film The Irishman in its first week on the platform.