Netflix (NASDAQ:NFLX) shares fell more than 2% in early Friday trade after Wolfe Research analysts downgraded the rating to Peer Perform from Outperform.

“2024 ARPU expectations look full, while today’s paid-sharing net adds lead to tomorrow’s gross add shortfalls,” they said in a downgrade note.

While Netflix has been expanding its share of the global premium video revenue, the analysts flag 2024-2025 growth forecasts as too optimistic.

“If future growth falls short, we doubt that NFLX’s 50% P/E and 70% EV/EBITDA premium to the S&P would hold up.”

The prior bullish thesis was built on the expected transition from a land grab phase to a more efficient phase, which aims to monetize existing viewership by addressing issues such as ad-supported video-on-demand (AVOD) and password sharing among 100 million global users.

“With reports of slow AVOD adoption, recent ARM shortfalls signaling trade down, management signaling less margin expansion, and a lack of compelling 3P data on sub growth, we believe the risk/ reward for NFLX is balanced,” the analysts added.

The downgrade call is also “supported by 100-150bps/yr. reductions to run-rate rev. in ’24E+ and 200-300bps./yr. to EBITDA.”