Netflix (NFLX -1.47%) shares are on fire after last night's blowout quarterly report, but CEO Reed Hastings wants to remind investors about the dangers of playing with matches.

In the final section of his letter to shareholders yesterday, Hastings chose to tackle the issue of stock volatility:

In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.

Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we've continued to grow our membership every year fairly steadily. We do our best to ignore the volatility in our stock. The progress we've made over the last 10 years is stunning. We want to make the next 10 years even more remarkable.

You have to admire Hastings. Many CEOs will offer up something like this when their stocks are in the cellar, but he's not afraid to practically apologize for the stock's ridiculous redemptive run since bottoming out in the double digits last year.

Yes, the returns are starting to look pretty similar. Netflix soared 397% in 2003. The stock had only appreciated by 283% so far in 2013 through yesterday's close, but the gap narrowed quickly after Netflix announced that it had surpassed 40 million global subscribers and issued encouraging near-term guidance. 

Hastings chose to highlight 2003. Could it be because the stock went on to lose more than half of its value a year later? Netflix will continue to grow in popularity in 2014 -- as it did in 2004 -- but a company's performance and its share price gyrations never move at the same speed. However, an important point is that Netflix wrapped up 2003 at a split-adjusted price of $27.34. Even after a seemingly unsustainable surge in 2003, the stock is still a 14-bagger over the past decade. 

Netflix's valuation is not as kind as it was a decade ago, but this is also a surprisingly easier competitive climate for Netflix. A decade ago it was exclusively a DVD renter, butting heads with Outerwall's (OUTR) Redbox that had rolled out a year earlier and what eventually became DISH Network's (DISH) Blockbuster. Blockbuster eventually followed Netflix's playbook by offering disc rentals by mail, but Redbox stuck to its low-priced kiosks. Video buffs had no shortage of options outside of Netflix.

These days we find Amazon.com (AMZN 2.43%) as Netflix's largest rival, but it's not even close. Amazon offers a decent-sized library for its Amazon Prime customers, but it's a sliver of what Netflix has struck through countless content licensing deals. There is no viable alternative to Netflix unless someone is willing to give up a lot of content.

Bears figuring that Netflix was obliterating its moat when it shifted to emphasize digital delivery failed to see that it's not a level playing field when you can spend billions a year on content and have a customer base that now tops 40 million. Blockbuster and Redbox have tried to make their mark here, but Blockbuster didn't have the financial fortitude to make things click and Redbox was woefully late to the streaming video space. Amazon has the "crazy like a fox" mentality to make a dent in this market if it should ever expand beyond its limited Amazon Prime offering, but -- for now -- Netflix is the only name that matters.

Hastings may be trying to watch out for investors seemingly overpaying for his stock these days, but even buying at 2003's top proved to be the smart move in retrospect.