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Jefferies analyst reveals her only buy-rated airline stock

By:
on Nov 24, 2022
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  • Sheila Kahyaoglu explains why she's bullish on Delta Air Lines.
  • She sees further upside in shares of the air carrier to $40.
  • Delta Air Lines stock is down about 25% versus its YTD high.

Delta Air Lines Inc (NYSE: DAL) is the best one to own for investors interested in playing the air carriers, says Sheila Kahyaoglu. She’s a Senior Equity Research Analyst at Jefferies.

Kahyaoglu’s bull case for Delta Air Lines

What sets it apart from the rest of the bunch, she noted, is its ancillary business that she’s convinced is not entirely backed into the stock price.

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Delta has a maintenance repair business. It’s $5.0 billion in revenue that we value at $10 billion; and a loyalty programme business we value at $10 billion. Compare that to enterprise value of $35 billion, that’s where we see value in Delta.

In its latest reported quarter, though, the air carrier came in slightly below Street expectations.

Nonetheless, Delta Air Lines stock is still down nearly 25% versus its year-to-date high. So, it remains attractive in terms of valuation.

Delta Air Lines stock has upside to $40

Other than that, of course, continued demand, particularly on the leisure side of things heading into the holiday season was among other reasons cited for the bullish view on this airline stock.

According to the Transportation Security Administration, it screened about 12% more passengers going into this holiday week versus pre-pandemic. On CNBC’s “Closing Bell: Overtime”, Kahyaoglu added:

Delta is our only buy-rated stock in network carriers. We like the diversification and where they’re exposed to corporate customers, which is small-to-mid-sized businesses, where you’re seeing the recovery improve much faster.

The Jefferies analyst sees upside in Delta Air Lines stock to $40 a share – that’s up another 15% from here.