Stock market jitters? What were those? For investors in Netflix, Inc. (NASDAQ:NFLX), 2018 has been a triumphant year. Even with the stock market slipping, NFLX stock has continued going straight up.

Netflix is already up 83% for calendar year 2018 and 116% over the past 12 months. With strong earnings reports and huge subscriber numbers, it’s easy to see why folks are excited. But the party is likely to end soon. NFLX stock has run far ahead of fundamentals and is due for a pullback. The company remains a long-term winner, but understand the risks before buying above $350 per share.

NFLX Stock Cons

Exceptionally Expensive: NFLX stock has always been overvalued by normal metrics. For a long time, the company made little or no accounting profit. Even with it decently into profitable territory now, it still runs an absurd price-to-earnings ratio.

For the past year, the company earned $710 million in net income. That doesn’t sound terrible. However, it has a market cap of more than $150 billion. It adds up to a jaw-dropping 210x trailing PE ratio. Even if analyst expectations aren’t too high and Netflix gets earnings up to about $2 billion next year, that’d still leave the forward PE ratio at 77x. That’s lofty. The company also sells at 12x price/sales. That’s above the key 10x price/sales ratio where good things rarely happen for investors even in the fastest-growing of stocks.

Betting the Farm on Content: Netflix remains in an awkward stage of development. In its beginnings as a streaming service, it built its business off licensing other media companies’ content. It’s since pivoted, and increasingly relies on its in-house produced shows and movies.

That comes at a high price. Netflix is said to be spending $8 billion on content this year. That’s more than pretty much all its major rivals. Remember that Netflix generated just $13 billion in revenues and under $1 billion in profits last year. That means that Netflix is reinvesting well over half its revenues and more than 8x its profits on filling out its streaming lineup. As long as Netflix has to spend such a gargantuan sum on content, it’s unclear if it will ever become strongly profitable. You’d think it’d have reached a scale effect with its already gigantic subscriber base, but so far, rising content costs continue to consume most of the profits here.

Streaming Competition Is Coming: Netflix won’t have the streaming market to itself. Already we’ve seen quite a few competitors spring up from various other media companies.

However, the threat is getting more serious in the short-term. Walt Disney Co (NYSE:DIS) is rolling out three different streaming services, targeting families, a wide-market offering, and sports fans. With attractive price points, these may eat into Netflix’s userbase, or at least make the cost of customer retention rise.

Notably, Netflix’ market cap recently passed Disney’s, which seems slightly crazy. Sure, Netflix has the best streaming platform, but Disney has a way deeper content base in addition to its other assets such as theme parks and ESPN. There’s a decent chance investors will look back in 10 years and marvel at the fact they ever thought Netflix was more valuable than Disney.

NFLX Stock Pros

Netflix Has the Best Platform: It seems that every content company is thinking about or has launched a streaming platform nowadays. These me-too players are missing a key point, however. Streaming has massive network effects. Users want a one-stop app with all their content.

It’s implausible to think that we’ll end up with half a dozen streaming platforms, all with exclusive content. Nobody likes having to remember a ton of passwords, getting a bunch of different streaming bills a month, and so on. Spotify Technology SA (NYSE:SPOT) continues to dominate music streaming, despite strong competition from Apple, Inc. (NASDAQ:AAPL) and others because it is an easy-to-use platform with most recorded music available.

The eventual winner in movie streaming will be the same. Disney, by launching three streaming services, not one, is using dubious strategy. To avoid piracy and get customers to pay, create as frictionless a user experience as possible. So far, Netflix is dominating on that front.

Local Content: Netflix has another huge edge on U.S.-based streaming competition. Netflix funds a ton — just an amazing amount — of content produced in smaller international markets. I’ve lived in both Mexico and Colombia with a Netflix subscription, and the company pumps out a mountain of on-topic shows for local users. You often see them go trending on social media within said countries.

That sort of content is difficult if not impossible for media companies based in New York or Los Angeles producing everything in English to compete with. It’s one thing to dominate the English-speaking world, but Netflix is playing a whole different ballgame. Get a large number of subscribers in emerging markets, and Netflix has a huge addressable market.

Ideal Acquisition Target: The big tech companies are always on the prowl for big acquisitions that can help them lock down a new market. Netflix is by far the juiciest plum available in the video/content space.

Rumors surfaced in May that Microsoft Corporation (NASDAQ:MSFT) might want to buy Netflix. It’d give it a huge new market. And Microsoft has made other big deals, such as buying LinkedIn, before, so we know it is willing to make moves. Other suitors might include Alphabet, Inc. (NASDAQ:GOOGL)(NASDAQ:GOOG). A combination of Netflix and YouTube’s content would make for a pretty powerful platform. Regardless, with the huge valuations that the big tech companies have reached, making a bid for Netflix would be a way to make a bold move to grow its revenues and scope.

NFLX Stock Verdict

Even I can’t justify NFLX stock at this valuation anymore. I understand how disruptive the technology is. I suspect that Netflix will continue to crush rival streaming platforms, and I see competition from Disney as deeply misguided.

All that said, the numbers here still simply don’t pencil out. At the end of the day, a stock only makes money for its shareholders in the long-term if it can earn a reasonable amount of profits. At $352 per share, it’s hard to come up with even an optimistic scenario where NFLX stock could return a meaningful portion of its market cap to shareholders as dividends or stock buybacks anytime soon. As great as Netflix’ business is going, the stock has clearly gotten ahead of itself. If you’re long, this is a good place to trim positions and wait to buy back in cheaper.

At the time of this writing, the author held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.