Is Delta Air Lines stock a good buy in July 2021?

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on Jun 22, 2021
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  • Delta Airlines shares are still not able to stabilize above $50 resistance
  • Jefferies sees Delta as the best-positioned airline company for the next stage of the recovery
  • If the price jumps above $50 resistance, the next target could be around $55

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Delta Airlines (NYSE: DAL) shares can still stabilize above $50 resistance even though research firm Jefferies sees this company as the top recovery pick.

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Fundamental analysis: Jefferies sees Delta Air Lines as the best-positioned airline company for the next stage of the recovery

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The airline sector shows signs of recovery, booking trends are shoving the improvements, and many analyst firms point to more upside potential for this company’s share price. Jefferies sees Delta Air Lines as the best-positioned airline company for the next stage of the recovery and assigned a buy rating ahead of the expected recovery in corporate and international travel (a price target increased from $50 to $60).

“About half of DAL’s sales are corporate, and we think its 50% exposure to SMB travel should drive some share gain as corporate travel restarts. We see 30% potential upside to 2023 earnings power, driven by yield improvement, lower expenses, and lower fuel costs,” said analyst Sheila Kahyaoglu from Jefferies.

Analyst firm Wolfe Research also assigned a Buy rating on Delta Air Lines but also warned that business travel would not return to pre-pandemic levels certainly next several quarters. Analyst Conor Cunningham from MKM Partners sees upside potential for Delta Air Lanes shares as vaccination rates improve and COVID-19 case counts continue to drop.

This week, Delta Air Lines announced that it would hire more than a thousand new pilots to respond to a rebound in travel demand. This proves that the company’s management expects that the business will continue to perform well, and they remain very optimistic about the company’s outlook.

Delta also expects U.S. leisure travel volume to return to pre-pandemic levels this month which will certainly improve the company’s profitability. On the other side, the global COVID-19 pandemic still poses downside risks to the recovery, and new coronavirus in Britain signals that a battle against the pandemic is not over.

The company’s fundamentals are still under pressure; total revenue has decreased by -58.0% Y/Y to $3.61B in the first quarter, while GAAP EPS was -$1.85. Despite this, Ed Bastian, Delta’s chief executive officer, said that the company is accelerating into the recovery, and 2023 EPS should be above $7.

Looking forward, Delta has strong growth prospects, but every negative news about Covid 19 will negatively influence the stock price.

Technical analysis: $50 represents the first resistance level

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Data source: tradingview.com

The critical support levels are $40 and $35; $50 and $55 represent the current resistance levels. If the price jumps above $50 resistance, it would be a signal to trade shares, and the next target could be around $55.

Rising above $60 supports the continuation of the bullish trend for Delta Air Lines shares, but if the price falls below $40, it would be a strong “sell” signal.

Summary

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The airline sector shows signs of recovery, booking trends are shoving the improvements, and research firm Jefferies sees Delta Air Lines as the top recovery pick. Looking forward, Delta has strong growth prospects, and if the price jumps above $50 resistance, the next target could be around $55.

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