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Stockchase Insights Delta Air Lines Inc DAL-N BUY ON WEAKNESS Jun 25, 2025

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

Airlines are always tough investments. Valuation is certainly cheap. EPS is expected to dip this year and then rise 20% in 2026. However this assumes no recession or other issues. The Q1 was decent and 19% ahead of estimates. The dividend was recently increased 25% (for the Q3). If we see Middle East peace and lower oil prices the stock may start acting better. As a 'value' stock we think it is OK. It has the usual sector and market risks, and we would not see it as a huge secular growth name. But......under the right conditions we could see an 11X mutliple or more, and this would be a good gain if it occurred. But note it's current multiple is not really out of line by historical standards.
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BUY

Fuel prices are now low, there's no labour contracts up for negotiation and plane travel demand is high. Also, the PE is now attractive. His pick is DAL in this space. They will probably earn $7.50 this year and $8.50 next. Make sense to put a 10x multiple on it.

HOLD

Airlines are under pressure right now, but will do well this summer with strong travel demand.

COMMENT

They just cut guidance, because the US consumer is starting to stall, due to weaker consumer guidance. They cut their revenue forecast from 8% to 4%, but in a recession they'd be down double digits. Stock weakness also happened after two high-profile plane crashes

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PAST TOP PICK

(A Top Pick Feb 04/25, Down 13.1%)Stockchase Research Editor: Michael O’Reilly

Our PAST TOP PICK with DAL has triggered its stop at $60. To remain disciplined, we recommend covering the position at this time. Combined with our previous guidance, this will result in a net investment gain of 27%.

DON'T BUY

They report Wednesday, and he expects awful numbers, because the company has warned the street. Is busy still weak or weaker since their last report? He worries that the travel bull market is completely done, especially if we go into a recession.

DON'T BUY

They reported last Thursday, reporting a small revenue miss but an earnings beat, but wouldn't reaffirm their full-year forecast, because the economy is too uncertain. DAL is being cautious, given how the White House changes its trade policy on a dime.

SELL

Sold it. Airlines have always been only a trade and now they lack momentum. Quite the opposite.

RISKY

Over 5 years, their annualized return is 15%, inline with the market, but it suffers these crazy ups and downs on a quarterly basis. Operations are still doing fine, including traffic, while fuel prices are declining.

TOP PICK

It is down with the other airlines. Although there is some slowing down of business in a couple of areas, the demand is strong for international travel and this type of traveler likes premium seats. Delta has the highest proportion of premium seats and by 2027 half the revenues will come from premium fees. 85% of new seats being installed are premium seats. He is not really taking recession into account because companies are creating more premium products to meet the demand from their wealthier customers. Buy 22 Hold 3 Sell 1

(Analysts’ price target is $58.21)

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