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netflix-imageHas Netflix peaked?

Analysts at Morgan Stanley announced on Tuesday that they were downgrading the company – adjusting their price target down from $333 per share to $310 per share. While Netflix was one of the fastest growing stocks on the S&P 500 last year — up 312 percent —  Morgan Stanley thinks that new factors this year will stifle the online streaming company’s growth.

In particular, the firm said that Netflix’s infrastructure investments aren’t nearly as valuable as they were in the past, while major content companies could be on the prowl for more expensive licensing deals, which would cut into Netflix’s profits.

“We believe digital video distribution has become largely commoditized and it may be easier for some Netflix competitors to gain their next 5 million users than it will be for Netflix,” analyst Scott Devitt said in the report, as noted in a piece by Forbes.

The report continued:

“Even if Netflix’s churn levels fall to record lows, we estimate that over 48MM out of 92MM residential broadband households (~53%) would need to watch Netflix over the next 12 months to meet our 2014E domestic sub forecast of 39MM. If monthly churn is closer Netflix’s long-term average of ~4%, the number of households would need to reach ~52MM (~57%).”

Meanwhile, the company is facing competitive pressure, especially from Amazon, Hulu and HBO. The Seattle-based retailer is a significant threat to Netflix’s business, because it offers video streaming as a component of its Prime membership service, which also offers other benefits like two-day shipping and access to free Kindle books at a lower annual rate than Netflix’s offering. As Amazon continues to gather content deals, Prime could become a more and more compelling alternative to what Netflix is selling.

Still, I wouldn’t count Netflix out just yet. The company is testing a lower-cost streaming tier that would put it on par with the cost of Amazon Prime, and it announced last quarter that its global subscriber base passed 40 million users, putting the company ahead of HBO’s last-reported U.S. subscriber numbers. Plus, Netflix seems to have nailed its original content plan better than Amazon. With new spinoffs from the Marvel universe and Breaking Bad coming to the service in a year or two, there’s still plenty of potential for growth.

Netflix fell from its high of almost $360 a share to $339.50 at the end of trading yesterday following the news, though the company’s stock has rebounded to more than $345 as of this writing. It now has a market value of $20.4 billion.

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