** Keybanc Capital markets downgrades its rating on Netflix (O:NFLX) to "sector weight" from "overweight" citing limited investment efficiency, margin expansion and ancillary opportunities for co over the next year
** Keybanc analyst Andy Hargreaves says the streaming giant's margin expansion has not developed at a pace that exceeds its expectations, which suggests upside is more limited
** On Tuesday, Netflix said hooked 7 mln new streaming subscribers from July to September, a third more than Wall Street had expected
** However, it also said it expects operating margins at the lower end of the 10 pct to 11 pct range for FY 2018
** Ancillary opportunities to build revenue in consumer products, advertising, broad theatrical releases and mobile-only subscriptions will take several years to develop and are offset by medium-term risks associated with rising interest rates and competition - Hargreaves
** Netflix faces competition from deep-pocketed cos such as Amazon (O:AMZN) and new streaming services from Walt Disney Co (N:DIS) and AT&T Inc (N:T) that are expected late next year
** Hargreaves is rated 5/5 stars for his recommendation on stock, he estimates NFLX's fair value at $377
** Stock was up 11.1 pct at $385 premarket