Last year, it looked like Netflix (NFLX -2.49%) might be a goner. Shares dropped more than 75% off their all-time high as subscriber growth dried up and revenue was flat.

However, the stock has recouped much of that loss after management announced plans to launch an ad-supported tier. Nevertheless, if you have owned Netflix stock for 12 months, you're still down -- albeit only 10%.

With all this volatility, investors might be asking themselves: Is now the time to own Netflix? Let's see what's happening with the company and what the future might hold.

Hand holding remote pointed at TV screen with a streaming service menu being shown.

Image source: Getty Images.

Storm clouds are gathering

It's expensive to make great entertainment. Indeed, Netflix spent just shy of $17 billion last year. And while that total decreased from the prior year, overall costs for new content could rise. 

The Writers Guild of America has a contract set to expire on May 1. It's believed that the guild is seeking higher compensation along with increased pension and health benefits. If an agreement can't be reached, the first writers' strike in 15 years could halt production throughout Hollywood.

Streaming services with deep catalogs or live sports could endure a long strike, but a work stoppage could be devasting to Netflix. The company has no live sports and a relatively modest back catalog of original content.

Ad tier to the rescue? Don't count on it.

Some might argue that Netflix's ad tier will kick-start growth. But it's also possible that the ad tier could cannibalize Netflix's revenue as existing subscribers downshift from premium to ad-supported.

And that's bad news because Netflix already has a growth problem. In its most recent quarter (the three months ended Dec. 31), year-over-year revenue growth slowed to 1.9%. That's the lowest ever for the company, dating back more than 20 years. 

If that weren't enough, the company's valuation sparks another concern: Why are investors paying up for growth when there is none? Netflix's rally over the last nine months has seen its price-to-earnings multiple more than double, from a low of 15 to its current 33.

NFLX Revenue (Quarterly YoY Growth) Chart

NFLX revenue (quarterly YoY growth) data by YCharts. YoY = year over year.

Is Netflix a buy now?

I remain skeptical that Netflix has what it takes to emerge victorious from the streaming wars. The entertainment business is notoriously difficult, with high costs and unpredictable customers whose tastes often change more quickly than predicted. 

What's more, the deep pockets of Netflix's tech rivals (AppleAmazon, and Alphabet) mean it will be costly for it to bid top dollar for the most promising original content or live sports. In addition, older, more established entertainment companies like Disney, Paramount, and Warner Bros. Discovery own legendary and extensive back catalogs. In the event of a prolonged writer's strike, Netflix could see its subscriber base shrink. 

Lastly, Netflix's introduction of an ad tier undercuts its original business model, which was based on giving its subscribers limitless ad-free, on-demand entertainment. In my view, investors should wait on the sidelines until it can prove its new business model works.