Netflix Stock Has Soared. Why This Analyst Is Now Downgrading Shares.

Netflix stock was downgraded to Neutral by Seaport Research. (Dreamstime)

Netflix stock was in the red on Monday after an analyst downgraded shares of the streamer over concerns that the company’s next phase of growth—which could take several years—is already priced in.

Seaport’s David Joyce downgraded shares of Netflix to Neutral from Buy late Sunday night. He also removed his previous price target of $1,230.

“We just think the company may need some time to execute against expectations before there can be another leg up for the shares,” Joyce wrote in a research note.

Netflix didn’t immediately respond to a Barron’s request for comment.

The stock was down 0.7% to $1,288.87 in Monday trading. Joyce’s downgrade comes after shares have surged nearly 45% this year, far outperforming the S&P 500’s 6.2% gain.

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Netflix has grown earnings, revenue, and subscribers after cracking down on password sharing and introducing a lower-priced ad-supported subscription tier. Investors see the stock as a haven during a time of economic uncertainty too. People have subscribed to the streaming platform despite concerns that the price of goods could rise under President Donald Trump’s trade policies.

Netflix now has to prove it can keep the momentum going. Skeptics say there is bound to be a slowdown after several years of strong growth.

The Wall Street Journal reported in April that Netflix executives were aiming for a $1 trillion market cap and believe that the company could double its revenue by 2030. Management said on its last earnings call that while they often have internal meetings where they talk about long-term goals, “it’s important to note that this is not the same as forecast.” Netflix currently has a market cap of $552 billion.

The company has a long road ahead if it wants to hit those goals, though it isn’t an impossible task. Analysts say if Netflix focuses on hosting more live content, such as sporting events, it could help the company keep gaining new subscribers.

Seaport’s Joyce, however, thinks that optimism is already priced into the stock at its current levels.

“We believe that plenty of the long-term opportunity set is factored into the shares at this price, and the company needs time to execute against the expectations in advertising, aggregating, launching experiences, and expanding share again,” Joyce said.

Investors will get more insight into Netflix’s growth when the company reports second-quarter earnings on July 17.

Write to Angela Palumbo at angela.palumbo@dowjones.com