Netflix (NASDAQ:NFLX) stock is down 25% in October and 30% from its all-time high. In late 2016, Netflix stock decisively broke above the $100 mark setting off a huge rally.

By the end of 2017, Netflix stock hit $200. This year, it doubled again.

Now though, the streaming video titan is trading sharply lower. This has led to a great deal of worry. Is Netflix still a leading growth stock, or has the tide turned?

The Black Sheep of the FAANGs

Several years ago, CNBC host Jim Cramer coined the FANG acronym. Subsequently, Apple (NASDAQ:AAPL) was included as the second A. Netflix stock has earned a lot of credibility with traders due to its grouping with these other four tech titans.

But Netflix lacks two things that the other four companies have: large free cash flow and massive cash balances.

Even Amazon.com (NASDAQ:AMZN), despite bears going on about it being overvalued and not very profitable, has more than $10 billion in free cash flow annually and is sitting on more than $30 billion in cash and short-term investments at the moment.

Netflix, however, has a flimsy balance sheet. It holds just $3 billion in cash right now, against $6 billion in current obligations and $8 billion in long-term debt. To be clear, there’s little risk of a liquidity crunch at present. Netflix isn’t extremely leveraged compared to many other companies, but it shows the fragility of the situation should investors lose confidence in the business model.

As recently as 2014, Netflix had under $1 billion in debt, but it has ramped that up dramatically in recent years. Why are they taking on so much debt? Simple. They are betting their future on producing their own industry-leading content library.

Until 2013, Netflix was consistently free cash flow positive. That means that regardless of what earnings said, the company ended up generating money from its operations. Since 2014, Netflix has pivoted wildly into the negative however, and is currently burning around $2 billion per year.

As a result, its long-term debt is likely to exceed $10 billion soon and keep growing from there. Again, this puts Netflix stock stock in a far different category than the rest of the FAANG stocks.

Content Is Expensive

In theory, spending more than they bring in now will be worth it. Netflix’s plan is to have the most content, thus creating a moat for the business against other streaming competitors such as Walt Disney (NYSE:DIS) and Amazon.

This is a sensible business strategy; I don’t fault them for taking on debt. If Netflix is captive to other producers’ content, those producers will take most of the profits as well. See Spotify (NYSE:SPOT) and its ugly financials for an example of what happens when a streaming service doesn’t own its content.

However, NFLX stock is vulnerable to a radical revaluation now that tech stocks are losing their luster. In an up market, few people pay attention to balance sheets. Those that do are viewed as curmudgeonly bears that simply don’t understand the new economy or the size of the total addressable market.

Once momentum stocks start slumping, however, people begin to wonder how far down a stock can drop.

For something like Apple, the answer is not that far. Its massive earnings, share buyback, and reasonable dividend give investors reasons to hold the stock during a panic. Additionally, its huge cash balance underpins the stock and allows management to operate from a position of strength.

Netflix doesn’t have this. They are hostage to the capital markets to fund their operations. If they couldn’t sell stock or bonds on acceptable terms, they’d need to slash roughly $2 billion in spending to get to cash flow neutral. That, in turn, would significantly impair Netflix’s ability to keep up with its streaming rivals.

Netflix Stock: Great Story but Trade It Carefully

If the tech bull market kicks back in, then NFLX stock seems like an easy long. It would quite probably hit new highs in 2019. The last quarterly earnings report was solid. In better market conditions, it’s unlikely that Netflix would have dropped like that, especially given the robust subscriber numbers. To put it simply, Netflix is executing well on its business plan.

However, it may need to modify its outlook if a bear market or recession hits. The company will find it far more painful to come up with $2 billion from the equity or credit market every year if financial conditions tighten. They certainly wouldn’t be able to keep ramping up the content budget even further, as they have in recent times.

If Netflix is forced to take its foot off the accelerator in terms of content or marketing, NFLX stock would likely get hammered. Remember that it traded at $15 in 2012 and $50 as recently as the end of 2014.

At over a 100x PE ratio, the company is marginally profitable. Its EPS looks much better than its cash flow. But nothing would stop the PE ratio from coming in dramatically if Netflix loses its growth momentum.

There’s no guarantee this bout of tech stock selling will amount to anything significant in the longer-term. In which case, NFLX stock looks like a decent buy-the-dip opportunity. But if tech continues to fall out of favor, Netflix stock will go much lower.

It will decouple from the other FAANG names as the earnings and balance sheet fundamentals simply aren’t there. If you do own Netflix stock, keep it on a shorter leash than you might with stronger tech names.

At the time of this writing, Ian Bezek had no positions in the aforementioned securities. You can reach him on Twitter at @irbezek.