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Netflix Rally Stalls as Capital IQ Issues 'Sell' Rating



Shares of Netflix (NFLX) dropped into the red on Tuesday, erasing earlier gains after the optimism from its strong earnings report was cut short as S&P Capital IQ cut the movie streamer to “sell” from “hold.”

The bearish outlook comes after a slew of upgrades, price target increases and upbeat analyst notes from other brokerages that had Los Gatos, Calif.-based Netflix trading as high as 9% earlier Tuesday morning.

It also comes after CEO Reed Hastings expressed some modesty during the Netflix conference call, where he warned of mounting euphoria surrounding its rallying stock.

“Every time I read a story about Netflix is the highest depreciating stock in the S&P 500, it worries me because that was the exact headline that we used to see in 2003,” Hastings said on a call with analysts. “We have a sense of momentum, investors driving the stock price more than we might normally. There’s not a lot we can do about it, but I wanted to honestly reflect upon that.”

Netflix was pushed higher Tuesday morning after it announced a quadrupled third-quarter profit on sharply higher subscriber gains, thanks in large part to its popular new original series, House of Cards and Orange is the New Black. Sales grew 22% to $1.11 billion.

The company had also projected current-quarter earnings of between 47 cents and 73 cents, above average analyst estimates in a Thomson Reuters poll of 46 cents.

Despite Capital IQ’s bearishness, which came after the conference call, Netflix earlier on Tuesday was met with a wave of positive notes, including from Evercore (EVR), which  upgraded its rating on the movie renter to “equal weight,” citing a lack of meaningful competition.

Shares of Netflix fell about 3% to $343.80 in recent trade, though they remain up about 275% on the year.

Follow Jennifer Booton on Twitter at @Jbooton