Netflix Inc. shares plunged 38 percent in pre-market trading after its weak outlook spooked investors and prompted several analysts to cut their recommendation on the stock.

On Monday, the company warned of more cancellations as it grapples with the fallout from a price increase and other unpopular moves.

We believe the NFLX model is unsustainable, as the company faces rising costs that it hoped it could pass onto its (subscribers), which appear unwilling to do so, Janney Capital Markets said in a note to clients. The brokerage cut its rating on the stock to sell.

The company that shook up Hollywood with its DVD-by-mail service has seen its shares plummet since July, when it announced a price rise for subscribers who wanted both DVDs and streaming. A wave of cancellations hit the company that had been famous for red-hot growth and loyal customers.

Netflix -- which is trying to recover from the roughest patch in its nearly 15-year history as it moves to emphasize online streaming of television and movies -- has forecast a loss for the first quarter of 2012 as it spends more to expand into Europe.

Expansion into the UK and Ireland - a positive longer-term - comes at the same time domestic growth is slowing and content costs are building, said J.P. Morgan Securities, which expects a combination of these factors to significantly pressure 2012 profitability.

JP Morgan downgraded the stock to neutral from overweight, and slashed its price target to $67 from $205.

Separately, Citigroup, which also downgraded the stock to neutral, said the 60 percent price increase in July and the aborted effort to separate the DVD business were two major execution errors.

In addition to higher international costs, the company could be hurt by competition from Apple Inc, new Dish Network Corp promotions and Inc initiatives.

As Netflix stumbles, rivals such as Dish Network's Blockbuster, and Wal-Mart Stores Inc's Vudu are ramping up their online entertainment offerings to better compete with the company.

Netflix shares were trading at $74.05 in pre-market trade on Tuesday. They closed at $118.84 on Monday on Nasdaq.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty)