Dec 9, 2015 ยท 5 minutes

When we talk about returns from a stock, we mean the money one can receive on top of an initial investment.

But there is another kind of return that people look for in tech stocks, admittedly one that is far, far less valuable: the ability of a stock to generate drama, and therefore online conversation.

For years, Netflix has been delivering both kinds of returns. The stock is up 160 percent in 2015, or 20 times the Nasdaq Composite's 8 percent gain. But “up” for Netflix never involves anything resembling a straight line, but rather a line drawn by a hyperactive, sugar-fed child given a piece of chalk.

This week has been no exception. After a few weeks of charting multiple, ho-hum new highs, Netflix hit yet another record of $130.93 on Monday. No sooner were we tech reporters writing up stories observing just this fact then Netflix began a sudden and dramatic drop that caused it to close down 5 percent on the day.

After falling further Tuesday morning – as low as $121 a share – Netflix suddenly rallied as high as $128 a share before settling down to close at $126.98 a share, which is pretty much where it was trading before this volatile week began.

There were a lot of reasons driving this volatility, the biggest one being that Netflix investors expect, or even crave, volatility. Netflix, like Amazon, has been granted a Willy Wonka-like golden ticket to fly as high as it can because Netflix, like Amazon, has shown it can invest its current revenue into things that bring future growth. Fundamental analysis doesn't apply, and in a vacuum of fundamental analysis, volatile speculation rushes in to fill the void.

Netflix, again like Amazon, has a pet metric it likes investors to track to distract them from the fact that the net income margin is wafer thin, if not non-existent at times. Amazon favors free cash flow. Netflix points to the number of net new subscribers, which not only shows how many people signed up in the past quarter but also factors in how many left – or, more importantly, didn’t.

As Chief Content Officer Ted Sarandos said at a UBS conference for media investors Monday:

We'd like externally for you to look at our net subscriber growth. If we are growing our subscriber base, it's because we are attracting people for our great content... We measure it internally by hours of viewing per user and externally would like you to look at that subscriber growth because at the end of the day that is the ultimate measurement of our health.

The flip side, of course, is that Netflix has to keep investing in new programming and new content licensing enough to pull in new subscribers – and do this in its ever-expanding global markets. The battle between Netflix bulls and bears has long centered on this question: Can Netflix spend on new content in ways that keep growing its audience? Or will the spending grow so heavy the roof falls in at some point?

That Netflix’ stock has more than doubled this year argues that the bulls have the strongest argument, at least for now. But Netflix keeps adding new programming: 16 original series this year and 31 coming in 2016, along with more than 30 feature films, documentaries, comedy specials and 30 children's series exclusive to the streaming service. The company's $5 billion programming budget next year would be, Sarandos boasts, probably the largest on the planet.

That last statement could either scare you or cheer you, depending on whether you expect Netflix to reel in enough new subscribers to make it pay. Any signs that the content plans might hit a snag can send the stock tumbling, as happened when Sarandos was asked Monday what challenges the company faces in the coming year. His reply:

We're embarking on something that's fairly new in terms of the media space, global licensing and programming. I don't know if it's more difficult than expected but it's not been an easy road because all of the studios and networks have situated themselves to be regional sellers... So it's made complete sense that Sony and Disney Warner Brothers would have regional sales teams. There's some resistance to it, but mostly from the people in charge of regional selling, who don't want their job marginalized. It's a pretty big change.

There is certainly an efficiency to what we're offering, and it should be economically neutral. We're not using the scale to get a discount. We're using the scale to get access. At the end of the day it will be better for the studios to be more efficient selling machines. We are kind of alone in the space of buying global rights.

This was meant as a back-handed admission of a “challenge” that actually showed Netflix is alone in seeking global licensing rights – that is, Netflix being Netflix again, blazing first into the future of media. But it sent the stock reeling downward, perhaps because it reminded investors of just how ambitious Netflix's content plans really are, or perhaps because the licensing plans are hitting an obstacle.

It's almost as if Netflix investors are bipolar neurotics, wringing their hands over the exaggerated significance of every little ripple of news that comes along, before forgetting its significance once the next ripple jostles their view of things.

On Tuesday came news that Amazon was partnering with Starz, Showtime and many other video providers to offer discounted subscriptions through Amazon Prime. This is far likelier to help Amazon or hurt cable companies than it is to put a dent in Netflix's growth. Still, Netflix slumped at the opening. Then it surged higher later in the day because – who knows why? Maybe because one of its children's series got a positive review in the Hollywood Reporter?

The broader issue of rising competition from Amazon, HBO, and potentially Apple could be a long-term concern for Netflix. But for the next year or so, there are only two potential things standing in Netflix's way. One of them is its own programming choices. This seems unlikely to hurt it, given its recent track record. For every Marco Polo there is at least one Narcos.

The second risk factor is an old, familiar one – the stock's heady valuation. Netflix is trading at 635 times its expected earnings this year. Again, investors are giving it a pass, they expect the company to invest successfully in its future growth. But if the broader market swings down, high-fliers like Netflix will fall harder than most. Whatever the stock's future trajectory, just don't expect it to get there in a straight line.