With Netflix (NASDAQ:NFLX) set to post third-quarter earnings next week, I figured that now would be an ideal time to take a closer look at the pioneer of DVD rentals by mail. I can't deny where I stand on this debate. I've been a shareholder and a subscriber since 2002. I have been rewarded, watching the company's reach grow to cover more than 5 million accounts these days.

However, there are also some real threats on the horizon. Is digital distribution a model killer or an opportunity? Will Blockbuster (NYSE:BBI) keep fighting for the online dollar?

I needed some balanced perspective, so I turned to the Motley Fool CAPS community to see what they think about a stock that always seems to be making waves on Wall Street.

Getting their kicks on Netflix
Even with the feverish activity taking place in online delivery, Netflix still commands a large bullish faction around Fooldom. Let's check in with what some of them have been saying.

TMFBreakerDave -- 4/12/06:

Netflix has no meaningful competition left, and is neither slave to bricks and mortar, nor conflicted toward one studio or another. Netflix is for movie fans, and adds a convenience which is not only preferable to savvy consumers today, but almost addictive. Very well managed company and brand name, and I like CEO Reed Hastings. Video on demand threat is overrated. Having the hearts (and total rental histories) of millions of customers is very valuable, and will enable Netflix to transition toward online downloads of movies better than most potential competitors who will by contrast be operating off of standing starts. I like this stock.

TMFNato -- 5/12/06:

Blockbuster's tottering, Amazon's (NASDAQ:AMZN) steering clear, and the mighty Wal-Mart (NYSE:WMT) has folded. Netflix beats 'em all. Customers love it -- I got hooked by an ex-girlfriend, and proceeded to sign up my parents, who in turn signed up my grandmother -- and the company's speedy service and vast selection can't be beat. Selling used discs is a smart way to leverage Netflix's superior distribution network to make a little extra cash and clear out unneeded inventory. And when it comes time to make the jump from shipping discs to video on demand, Netflix should have the loyal customer base and Web infrastructure to make a tidy profit.

InvestorPoet -- 6/21/06:

Netflix provides great service and good value. I believe that concerns over Video-on-Demand and digital downloads are overblown resulting in the stock trading a severe discount to intrinsic value. I used growth rates declining from 35% to 15% over the next ten years and a reversionary P/E of 22.5 (1.5 PEG), which results in an intrinsic value of $66/share. This represents 42% of the intrinsic value.

Joeislove -- 8/18/06:

Netflix is a solid company which will recover from its recent tumble by doing what they have been doing the whole time: providing a quality service at a reasonable price. Everyone I know that uses Netflix loves it, and I don't see any of them giving it up. I stopped my subscription, but just because they don't send DVDs to APO addresses. As soon as I return to the States, NFLX will be one of the first companies I reestablish contact with.

A1wes -- 8/20/06:

VOD is not an imminent technology. Bandwidth problems and lack of technology penetration are just two of the many issues that will keep VOD from being a primary force in the movie industry for many years still. It will come, and by the time it comes Netflix will be ready.

They have a huge stockpile of cash, no debt, and a cash-machine business model. Sounds like the perfect company to be able to deftly incorporate a viable VOD model into the larger business. Remember, being first doesn't mean that you will be the best or be the winner. The first iPod came out approximately 3 years after the first mp3 players. Didn't seem to hurt Apple (NASDAQ:AAPL). And in the meantime, I'll just ride out the upshoot in subscribers as video rental storefronts close and Movie Gallery (NASDAQ:MOVI) and Blockbuster continue to hemorrhage money. All of that and you can't beat the excitement of getting that little red envelope every couple of days.

Sick over Netflix
Naturally, not everyone is smitten by Netflix. Even if only 190 of the 1,277 investors that have an opinion on the company in CAPS feel that the shares will underperform the market, the bears can be a vocal lot.

Let's see what some of your more bearish fellow investors had to say.

Klingsor4 -- 9/20/06:

Bottom line: this is a good company but until it comes up with some original programming (which will, of course, eat into its margins) it will never be worth more than a few billion dollars. As a rough valuation, if 5M subs generate $35M a year in profits, 10M would probably generate $80M. Even if the company did get to 20M subs, it's doubtful that could translate to more than $200M in profit. And then what? Then the growth would slow and the P/E would drop to no more than 20x these earnings. You'd have a company valued at about $4B, which would be a double from $30 a share and a 2.5x return from $21 a share in about five years. Not bad, right? Well, that's the optimistic scenario and roughly the one that has been baked into the price. Most other scenarios have the company falling, far, far short of that goal so the expected value is probably something like 10% returns per year from here on out. Which I guess is more than the large cap index will return, but not nearly large enough to compensate for the volatility.

Ultimately, this is a profitable business but it will likely get bought out somewhere along the line or merely end up as a nice cash-generating machine -- but still well short of expectations.

DenisHancock -- 9/18/06:

Netflix is a classic "cool idea, terrible long term investment" stock. When digital distribution emerges for rentals on broad scale, Netflix has no reason for being. Period.

If I'm going to pay 22x earnings for stock, I would prefer a business model that has at least a theoretical chance of long-term survival-and not have Apple, Google (NASDAQ:GOOG), Amazon, Yahoo!, Microsoft, the Cable companies, the telcos, and every other powerful player jammed in the middle of digital distribution breathing down their necks threatening disintermediation.

The only way I see a Netflix investment paying off, long-term, is if one of the big guys erroneously overpays for their customer base. That makes it more of a speculative play than an investment.

Mikegmazz -- 9/23/06:

I love Netflix and use their service. However, this is purely a technology issue. In 2 years cable companies will offer the same service but instead of in the mail you'll get it on demand. And more options will be available. You can bank on it.

P1ato -- 8/24/06:

I believe that NFLX's model is a transitionary one, filling the convenience gap between today's video rental stores and tomorrow's video-on-demand. With advances in bandwidth, video compression, and set-top technology, it is hard to see how video-by-mail will be the prevailing model (or even an existing model) five years from now. Could NFLX become a leading player in VOD? Sure -- or not. At present, they've announced no strategy that indicates how they might do that. Their brand strength and subscriber base aren't enough to vault them into the "pole position", as their CEO put it, and are certainly not enough to keep them from being flanked by the cable, phone, and/or satellite operators (can you say "TIVO"?).

Subscriber acquisition costs are climbing at a fairly sharp rate, and this suggests that they've picked much of the low-hanging subscriber fruit, or that Blockbuster's aggressive push into video subscription is showing effect (note: I'm no Blockbuster bull, either).

Cjlee001 -- 10/18/06:

Downloadable videos are have been wildly popular thanks to YouTube/Google. Now with the introduction of downloadable movies, Netflix will become obsolete much like Blockbuster and Tower Records. Sure Netflix can get into downloadable videos too, but that means they'll be competing against heavyweights such as Apple, Microsoft, Sony, and Google. I just can't see Netflix coming out on top.

Red all over?
The next few years -- perhaps even just the next few quarters -- will be a defining time for Netflix. Is its model built to last? Will it be able to stay ahead of the curve if it has to tweak its strategy? Will Netflix ever follow Gamefly into video game rentals?

The questions are as plentiful as the opinions. Have something to add? The best way to let your voice heard is to join the fray and share some thoughts of your own.

Motley Fool CAPS is a new community-driven experience where individual investors pool their knowledge to seek out superior stock ideas. Are you up for the challenge? Go ahead and give it a shot .

Netflix and Amazon.com are Motley Fool Stock Advisor recommendations. Wal-Mart is an Inside Value newsletter selection.

Longtime Fool contributor Rick Munarriz learned to swim at an early age so he doesn't fear diving into the community pool. He does own shares in Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy .