We came across a bullish thesis on Delta Air Lines, Inc. (DAL) on WallStreetBets subreddit page by jaunty_quant. In this article, we will summarize the bulls’ thesis on DAL. DAL Technologies, Inc. share was trading at $50.79 as of Sept 30th. DAL’s trailing and forward P/E were 7.29 and 6.94 respectively according to Yahoo Finance.
A row of commercial airplanes on a runway, their engines running and ready for takeoff.
Delta Airlines is a major player in the airline industry, which faces challenges like low-profit margins, high debt, and market ups and downs. Despite these issues, Delta stands out given its reputation as the recent drop has in prices has made it a good time to consider buying its stock. The stock price has fallen from $54 to $42, mainly due to higher fuel costs, lower profit margins, and a one-time $380 million loss from a CrowdStrike outage. However, Delta’s current stock price is attractive compared to other airlines, with a trailing PE ratio of 6.1 and a forward PE ratio of 5.9.
From a technical analysis perspective, there are several positive signs for Delta’s stock. The 20-day moving average has crossed the stock price, which usually leads to a price increase 91% of the time. The 50-day and 200-day moving averages also suggest the stock price will go up, with potential returns between 34% and 46%. Even though trading volume has been low, a price target of $56 within four months seems possible.
Despite short-term challenges like rising fuel costs and the recent Crowdstrike outage which did affect its revenue is expected to be a one-off thing. Fundamentally speaking Delta is in a strong position as a premium airline with loyal customers and as the budget airlines shift towards quality over quantity it will benefit Delta due to its brand strength. Its strong cash flow and pricing power provide long-term stability. The company’s diverse revenue streams and high return on invested capital compared to its peers also support its positive outlook.
Thus, Delta’s strong technical indicators, solid fundamentals, and undervaluation in a volatile market make it a good candidate over the next two quarters with a target price of $56, representing a 34% increase.
Delta Air Lines, Inc. is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held DAL at the end of the second quarter which was 51 in the previous quarter. While we acknowledge the risk and potential of DAL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.