There are many ways to run a business, and just as many ways to get customers to pay. One popular business model is the recurring revenue model. Rather than getting a big one-time payment, and potentially not hearing from a customer again for years, the recurring model offers consistent, if smaller payments.
This model has been popularized across a number of industries. The entertainment industry has leaned heavily into it, particularly with streaming services.
The leader of streaming, Netflix (NFLX), has fared well with this model. And it’s had success growing subscribers, even after cracking down on password sharing.
That helped shares soar nearly 70 percent in 2023. But there’s still room to run, as Netflix remains well off its all-time highs.
Earnings are up 20 percent over the last year, and profit margins are creeping higher to 14 percent. Plus, shares trade at 30 times forward earnings.
Action to take: With a rising share price and operations improving, chances are the stock will continue to trend higher this year. Netflix looks like a reasonable buy at current prices, and to buy on any pullback.
For traders, the September $600 calls, last going for about $29.00, could see mid-to-high double-digit gains on a further rally this year. Traders may want to look to buy the call option on a down day for Netflix shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.