Either way you look at it, Netflix (Nasdaq: NFLX) is heading south.

Shares of the rapidly growing video provider hit a new-all time high yesterday, announcing a bold southward expansion of its disc-less streaming service. Merriman Capital analyst Eric Wold doesn't think that's the only way that Netflix is going south of the border: Wold is downgrading shares of Netflix, from "buy" to "neutral," on valuation concerns given the recent run.

Yes, Netflix has been dazzling from most starting points. The stock is trading 65% higher so far in 2011, having nearly tripled over the past year. If you go all the way back to when the shares bottomed in the teens three years ago, you'd be looking at a 16-bagger.

The fundamentals have largely held up their end of the bargain. Netflix continues to tack on subscribers at a frenetic pace. There are now 22.8 million domestic subscribers, including 0.8 million streamers in Canada, where Netflix wasn't even available last summer.

Itinerary adjustements
I should point out that Wold doesn't necessarily believe that shares of Netflix will be literally heading south. He just sees limited upside at this point, given his target valuation range of $300 to $330. This isn't a reasonable return on a risk-adjusted basis, given a stock that's trading for more than 40 times next year's projected profitability.

Wold points to Redbox parent Coinstar (Nasdaq: CSTR) as an attractive replacement. I disagree. It certainly may seem to be a worthy antidote on a valuation basis, since Coinstar is trading at a forward earnings multiple in the mid-teens, a third of Netflix's number. But the Coinstar thesis crumbles after that.

Valuation concerns aside, I'm confident that Netflix will be a bigger and more relevant company in three to five years. Can the same be said about Coinstar? DISH Network (Nasdaq: DISH) recently tweaked the pricing strategy at the Blockbuster stores still standing, closing in on Redbox-esque value for shorter rentals. NCR (NYSE: NCR) continues to bank on its Blockbuster Express kiosks.

Then we get to concerns about the media itself. DVDs are following CDs into obsolescence in this age of digital distribution, and Netflix is leading the charge away from physical media, choosing to expand through only its streaming plan.

What's Coinstar doing to keep up? It's been promising a digital strategy since last summer, but it's been firing blanks. The chatter last year was that it would team up with a major player -- Amazon.com (Nasdaq: AMZN) or Wal-Mart (NYSE: WMT) seemed the likely partners -- but that seems unlikely now. Wal-Mart is still lost when it comes to digital distribution, and Amazon appears to want to go it alone.

Netflix certainly isn't cheap, but that doesn't mean that Coinstar, looking out a few years, isn't expensive.

The new truths about Netflix
I can't knock Wold's caution the way I have with other skeptics who turned bearish at much lower price points. For now, he may have nailed the near-term top.

I have been rewarded as a Netflix shareholder in recent years, but I, too, am feeling a bit hesitant about where the shares are heading over the next few months. The future won't mirror the past. The stock isn't going to pop another 65% during the second half of the year, and Netflix certainly isn't going to triple by next summer.

The next few quarters will be challenging, especially on the bottom line. Netflix has already made it clear that overseas expansion won't come cheap, and that opens the door for sloppy profitability despite what should be solid top-line gains.

However, Netflix is also in a unique position these days. People aren't worried that Netflix will be rubbed out in the digital revolution, the way they were when the stock was meandering in the teens on the other side of this recession. Netflix is now the proprietor behind the digital service that consumers can't live without and that Hollywood can't ignore.

Is Netflix overvalued or undervalued? Share your thoughts in the comments box below.

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Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.