UBS is getting less bullish over Netflix shares after the stock’s stunning rally this year.

The firm lowered its rating to neutral from buy for Netflix shares, citing the internet company’s high valuation.

“We believe Netflix's core competencies in both content & tech should drive a virtuous circle of greater subs and increased viewing time, broadening its moat for global leadership in SVOD,” analyst Eric Sheridan said in a note to clients Wednesday. “It's all priced in. … While we remain constructive on the business LT, we view the stock as a less compelling (& roughly equal) risk/reward at current levels, pricing in 5 yrs of excellent forward operating performance while likely underestimating risk factors from competition, FCF burn, & dependence on capital markets for content spending goals.”

Netflix shares are down nearly 2 percent Thursday. The company’s stock is the best-performing member of the S&P 500 this year. It's up 118 percent year to date through Wednesday versus the market’s 4 percent return.

The analyst said Netflix's current stock price implied a multiple of 39 times his estimated 2022 EBITDA with optimistic assumptions such as 15 percent annual subscriber growth and 7 percent annual pricing growth per member.

"In addition to valuation, we don’t see the pronounced upside to Q2 results vs. prior quarters," he said.

Sheridan still raised his price target to $425 from $375 for Netflix shares, representing 2 percent upside to Wednesday’s close.

Netflix declined to comment. The company is slated to report its second-quarter earnings results Monday.

— CNBC's contributed to this story.