In a research report published on Tuesday, Macquarie analyst Tim Nollen downgraded shares of Netflix, Inc. (NASDAQ:NFLX) from a Neutral to an Underperform rating with a price target of $85, which reflects a potential downside of -11.5% from last closing price.

Nollen explained, “Many countries Netflix is expanding into have been growing pay TV markets with incumbent operators that have invested in VOD/SVOD offerings, often as add-ons to existing subscriptions. In addition, numerous SVOD services have gotten off the ground, often at cheaper prices and offering more local content.”

The analyst continued, “We believe success will require partnering with local content providers and/or investing in more local content, or in content that will travel. This will be expensive – indeed, Netflix’s total content obligations have ballooned to $16-18bn including “unknown” off-balance sheet commitments, and could well rise further. We have developed a model that we’ve accurately employed before to forecast Netflix’s 3-year P&L content costs, which we work into our assumptions, leading us to cut EPS estimates in 2017, 2018 and 2019.”

Finally, “US growth could also be tougher in the near term, with more competition from Amazon, which is doubling its content spending this year, and a plethora of OTT options coming to market, from HBO Now to skinny bundles to virtual MVPDs like Hulu Plus. These will all compete for producers’ content and consumers’ time.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Tim Nollen has a yearly average return of -8.8% and a 57% success rate. Nollen has a -175.9% average return when recommending NFLX, and is ranked #3517 out of 4143 analysts.

Out of the 32 analysts polled by TipRanks (in the past 3 months), 17 rate Netflix stock a Buy, 9 rate the stock a Hold and 6 recommend a Sell. With a return potential of 15%, the stock’s consensus target price stands at $110.23.