By Kevin Kelleher
July 24, 2013

By Kevin Kelleher, contributor

FORTUNE – Wrapping up a conference call with analysts and investors this week, Netflix CEO Reed Hastings shared his view that the company isn’t so much in the TV business as it is in the “membership happiness business.” Too bad for Wall Street that he didn’t mention the business of pleasing investors every quarter.

Within minutes after reporting its earnings, Netflix (NFLX) shares dropped 7% in after-hours trading, even though the $1.07 billion in revenue met analyst forecasts and the 49-cents-a-share net income beat estimates by nine cents. That wasn’t enough for investors. Some analysts had predicted as many as 726,000 streaming subscriptions would be added to Netflix’s U.S. membership base.

Instead, Netflix added 630,000 net new subscriptions for a total of 29.8 million. Internationally, Netflix added 610,000 subscribers, bringing its total to 7.8 million. While the 630,000 figure was well below the 2 million net adds in the previous quarter, it was solidly in the middle of the range Netflix had been offering as guidance in a seasonally slow quarter. But because it was below what some analysts were calling for, the stock dropped. So Netflix was punished for someone else’s forecast, not its own.

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Wall Street was also unhappy with another innovation from Netflix — a videocast in which executives didn’t take calls from analysts and investors, but had them submitted to two moderators, CNBC’s Julia Boorstin and BTIG analyst Rich Greenfield. Many analysts grumbled that the new format wasn’t only unnecessary, it was unfair – not to mention a possible violation of Regulation FD, an SEC rule intended to reduce selective disclosure of company information.

Boorstin and Greenfield did their best to hammer Hastings and others with follow-up questions, but they remained as tight-lipped as ever about details like ratings figures for individual programs. In a letter to shareholders, Netflix stated that the service’s launch of Arrested Development in the quarter generated “a small but noticeable bump in membership.”

Pressed for more details on the Arrested Development’s effect, Hastings and chief content officer Ted Sarandos back pedaled, saying it’s hard to tell which particular show brings in new subscribers, that the show’s value was long-term, and so on. Hastings acknowledged that there was a bump in new subscribers when Arrested debuted that was “more than the weekly pattern would have suggested” but “it was not tremendously significant in the short-term.” The effect was to add to concerns that Arrested’s impact on Netflix’s comeback was muted, probably not what the company wanted.

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Hastings has never been shy about stating that Netflix is playing a long-term game. In a perverse way, that approach – as sensible as it is from a business perspective – has contributed to the speculation that has left Netflix’s stock one of the most volatile for a large-cap stock. Netflix traded briefly above $300 two years ago, then plunged as low as $52 a year ago after a botched attempt to change subscription pricing, then rose back to $270 this month amid optimism its HBO-like programming strategy was working.

More than most tech stocks, however, Netflix is an investment in the future of TV (or, if you prefer, membership-happiness). Despite bigger cash piles, Google (GOOG), Amazon (AMZN) and Apple (AAPL) have yet to gain a stronger foothold in online television, despite its growing popularity. Meanwhile, the big-media backed Hulu has undergone its own struggles.

That leaves Netflix the best-positioned contender in the market, even after its subscription controversies and missteps. The stock has not only been the best performing stock in the S&P 500 this year, it’s one of the most expensive. The 49-cents-a-share profit was a big enough improvement that it lowered Netflix’s trailing-12-month PR ratio to 312 from well above 600. Based on expected 2014 earnings, the stock is trading at a still lofty 81 – in essence a bet on profits that are laying several years down the road.

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Asked about concerns among shorts and other investors about the company’s valuation, Hastings said that “management is probably not the greatest judge of their own stock price.” CEOs knows it can be foolish to comment on their stock price, but if Netflix wanted to temper the speculation that leaves the stock unpredictable and volatile, it could offer more and clearer metrics on its current business.

Bulls and bears like to argue over Netflix’s outlook, and each camp can point to their own favored data to state their respective cases with passion. There’s little doubt that Netflix last quarter continued to advance toward its long-term goals, but the question remains whether threats like intense competition, rising content costs and a possible slowdown in subscriber growth will slow or derail its plans to reach them.

For now, the stock is so overvalued that even slightly bad pieces of news – such as the subscription adds in the recent quarter – could precipitate a sudden selloff in its shares. The reality is that Netflix’s comeback is proceeding, for now, just fine. In fact, the biggest threat to its near-term future seems to be the outsize expectations of some bullish investors.

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