Netflix Inc. was downgraded to neutral from buy at UBS, which cited valuation after a pronounced rally in the video-streaming company.

Thus far this year, Netflix is up nearly 60 per cent, making it one of the best performers in the S&P 500, which is down three per cent for 2020. The stock has also gained about 70 per cent off a March low, a rally that has lifted it to repeated records and widened the company’s market cap lead over Walt Disney Co.

Shares fell as much as 6.7 per cent on Tuesday, Netflix’s biggest one-day intraday decline since March.

UBS’s move comes just days before the July 16 release of Netflix’s second-quarter results, and while the firm expects to see “a widespread benefit” from the pandemic favoring indoor entertainment options, the benefit of this trend appears priced in at current levels, analyst Eric Sheridan wrote. He reiterated his US$535 price target.

At current levels, “investor fears seem to have disappeared and the current stock price increasingly reflects many of the long-term business moat dynamics,” he wrote. While the company’s long-term narrative remains intact, “we would rather be constructive at levels when a mix of potential subscriber volatility, FCF dynamics & competition are better reflected in the share price.”

UBS is not the only firm to grow somewhat cautious about Netflix at current levels. Wedbush reiterated its underperform rating on Tuesday, warning that despite a tailwind from shelter-in-place orders, “we expect content spending to trigger substantial cash burn for many years.” The firm raised its price target to US$220 from US$198, but warned that “competition for both content and subscribers may slow growth and limit the potential for price increases.”

Recently, Rosenblatt Securities wrote that it “struggle[s] to see the upside” from current levels given “uncertainty over how [long] this favorable environment will last.” Imperial Capital downgraded the stock last week.

Currently, the average price target on Netflix shares stands near US$476, implying downside of about six per cent from current levels.