Netflix, Inc. (NASDAQ:NFLX) stock is again on a tear. It began the year at around $200 per share. Less than four weeks later, NFLX trades near the $270 per share range. Most of this increase comes off an earnings report that met earnings expectations and blew out subscriber growth numbers.

Still, as valuations climb to ever-increasing highs, buying NFLX stock becomes more like gambling than investing. With NFLX stock offering only high valuations and limited monopoly power, most could lose their chips if they don’t walk away from the table in time.

Impressive Subscriber Growth for Netflix

Earnings for NFLX met expectations as earnings per share (EPS) for the quarter came in at 41 cents per share on $3.29 billion worth of revenue. In the final quarter of 2016, the company brought in $2.48 billion in revenues, reporting an EPS of 15 cents per share.

Where the company exceeded expectations was in subscriber numbers. The company forecast it would add about 6.3 million subscribers. Instead, the company added 8.34 million subscribers throughout the world, with 1.98 million coming from the U.S. alone. This subscriber growth occurred despite the cost of the service rising $1 to $10.99 per month.

No doubt this pleases stockholders as almost all current subscribers will stay with the service. A subscription remains well under the cost of cable offerings such as Time Warner Inc (NYSE:TWX) or Comcast Corporation (NASDAQ:CMCSA). It even keeps NFLX under the $14.99 cost of HBO Now.

As a result, the stock continues marching higher. This is despite the stock trading at over 260 times earnings. The NFLX stock price has risen by around 35% this month alone.

To be sure, growth is on a tear, with analyst estimates forecasting EPS growth of over 50% per year through 2020. Other metrics point to overvaluation as well. NFLX stock trades at about 10.7 sales. It has also reached an astounding 34 times book value.

Content Remains the Extent of NFLX’s Moat

Another problem remaining is content. The company also announced it would spend $8 billion on content this year. The company spent $6 billion on content in 2017. Frankly, they need to spend here.

When Walt Disney Co (NYSE:DIS) launches its streaming service, the best content library in the industry will no longer be available to NFLX. Moreover, competitors Hulu, Amazon.com, Inc. (NASDAQ:AMZN) and HBO Now have stepped up their content offerings.

For those addicted to shows such as Stranger Things or The Crown, Netflix has a monopoly. However, HBO Now has engaged audiences with Game of Thrones. Amazon Prime has drawn viewers with The Marvelous Mrs. Maisel, Hulu with The Handmaid’s Tale. These staples comprise the entire moat of said streaming services.

To everyone else, NFLX remains merely another streaming company. Hence, content spending preserves what little moat remains with Netflix.

Strategic moves such as content creation make NFLX stock one of the most sought-after holdings in the American tech industry. Yet, everything has its limits. I recommended selling the stock in previous articles, yet it keeps rising. It may rise further. However, at 260 times earnings, investing in even the best of stocks amounts to gambling.

Those who bought weeks or months ago are gamblers that have let their bets run and keep hitting the right cards. However, the reason why casinos make so much money is that nobody knows when to stop. When investors start taking valuation to heart, the cards will turn against these bettors. When that happens, look out below.

Bottom Line on NFLX Stock

Due to its high valuation, investing in NFLX has become gambling, and bettors who walk away too late could lose their shirts. Netflix is a great company. It offers a compelling product that engages audiences at a price much lower than cable. Still, investors do not have to pay over 260 times earnings to invest in great companies.

Moreover, when Disney starts its streaming service, the quality of Netflix’s content will take a hit. While it produces great shows of its own, its competitors have also produced series that draw audience interest.

I like Netflix programming and love Netflix as a company, but NFLX stock remains a gamble at these levels. Netflix stock may continue rising in the near term. However, investors who double down too many times at the NFLX table will eventually bust.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.