BARCLAYS: Here are the 4 biggest risks to the Netflix story (NFLX)

Netflix has had a big run in 2018, with shares up 116%.
Barclays analyst Ross Sandler raised his price target to $450 a share, citing its ability to win subscribers.
However, he warns there are four risks to the Netflix story.
Watch Netflix trade in real time here.

Investors have been enamored with Netflix this year. But if there's an argument to be made against the streaming giant, Barclays may have it.

"While we remain supportive of the story, we believe it is important to keep some perspective and how variables are shifting," Barclays analyst Ross Sandler wrote in a recent note out to clients.

Netflix's ballooning valuation, which has it at a price-to-earnings ratio of 249.15, is in large part based on one hope investors have for the streaming-giant: international expansion. Netflix has conquered the US market for entertainment streaming, and has already gained an impressive foothold internationally.That strength has been a driving force for Netflix shares, which are up more than 116% this year.

Netflix's first-quarter earnings report in April showed it gained 5.46 million new international subscribers, beating the Wall Street estimate of 4.98 million subs. And Goldman Sachs analyst Heath Terry believes the streaming giant will add 34 million international subscribers in all of 2019.

Sandler raised his price target to $450 a share, roughly 8% above where Netflix is currently trading, because of his confidence in Netflix's ability to accrue subscribers.

"If one were to value Netflix on a per subscription basis, valuation would not only have a stronger anchor but also be comparable to other media businesses," he said. It's the methodology that has Sandler believing "the stock looks cheap."

However, amid his bullishness, Sandler warns there are four core risks that investors need to keep an eye on:

Too much content: "The deluge of originals on the service can worsen user experience by making content discovery more difficult," Sandler wrote. Netflix is investing $14 billion on original content this year after signing top producer talent like Ryan Murphy. Original content usually gives media companies a competitive advantage, but can be a risk if there's too much of it that viewers can't locate their favorite content.
The debt market: Netflix finances much of its ambitious content spend with debt. In late April, Netflix raised $1.5 billion of junk bonds. "Netflix's ability to raise debt at investment grade rates despite burning $3Bn+ in cash in 2018 is a function of rates," Sandler said. "The turning of the credit cycle could be more disruptive to Netflix than usual assuming it doesn't turn cash flow positive in the next 2-3 years."
Just another tech stock: "Netflix is likely to trade on the overall view toward owning tech and it is unlikely to be immune to sector volatility," Sandler wrote.
ETF Flows: "ETF flows have had a disproportional positive impact on the group for the past few years, so if we were to see a reversal, one can assume NFLX would get caught up," Sandler said.

Netflix reports its second-quarter results on July 16. Wall Street analysts surveyed by Bloomberg are looking for earnings of $0.79 a share on revenue of $3.938 billion.