As a long-term destination for investors’ portfolios, brewing economic concerns might raise questions over Delta Air Lines (NYSE:DAL) stock. However, if you’re seeking a ticket to quick profits, the airliner – which recently released encouraging results for its second quarter – may be quite intriguing. As a near-term trade, I am bullish on DAL stock.
Robust Earnings Print Sends DAL Stock Flying
Understandably, few industries suffered quite as much as the airliners following the imposition of the COVID-19 disaster. Of course, Delta seeks to overcome that pain, and its recent Q2 print helped spark credibility.
As TipRanks reporter Shrilekha Pethe noted, Delta posted adjusted earnings per share of $2.68, representing a leap of 86% on a year-over-year basis. It also easily surpassed analysts’ consensus EPS target of $2.40. Further, Delta rang up operating revenue of $14.6 billion, up 19% year-over-year. As well, this tally beat the consensus estimate calling for $14.4 billion in sales.
Significantly, management raised its Fiscal Year 2023 earnings outlook, now expecting a range between $6 to $7 per share. Moreover, the leadership team anticipates revenue rising between 17% and 20% year-over-year. Pethe also pointed out that in Q3, “DAL has projected earnings between $2.20 and $2.50 per share while revenues are likely to rise between 11% and 14%.”
In fairness, the rise in DAL stock was short-lived, popping higher on the opening bell of July 13 but fading afterward. Last week, Delta shares fell nearly 3%. It’s possible that DAL incurred a buy-the-rumor, sell-the-news dynamic. Nevertheless, as a short-term trading idea, the airliner might make sense.
Not to mention, on TipRanks, DAL stock has a ‘Perfect 10’ Smart Score rating. This indicates strong potential for the stock to outperform the broader market.
The Fed Provides Some Cover for Consumer Behaviors
Since the beginning of last year and moving into the present, the Federal Reserve has dominated business headlines. Due to the excesses of the pandemic response, policymakers have the unenviable task of unwinding the easy money policy with hawkish interest rate hikes. However, the Fed’s efforts to facilitate gentle disinflation may provide temporary short-term cover for consumer behaviors.
To be clear, policymakers might not succeed in achieving gentle disinflation. Typically, a hawkish policy tends to slow business activity due to the associated higher borrowing costs. However, what’s relatively clear is that the Fed will not hammer the economy with a multiple-percentage-point rate hike. Instead, it will go with a gradual approach. Therefore, the crimping of consumer sentiment probably won’t happen immediately, which benefits DAL stock.
Put another way, the almost-carefree nature by which Americans racked up household debt to record levels – including $930 billion in credit card debt – is still prevalent. Cynically, that’s good news for DAL stock because it also suggests that revenge travel (the phenomenon where people seek out vacations that were put on hold because of the pandemic) remains a powerful catalyst.
Indeed, multiple news sources and editorials point to revenge travel as an overriding consumer influencer. Plus, with basically all international areas – with few exceptions – open for tourism, this framework should benefit DAL stock. After all, the underlying enterprise represents a key player in global itineraries.
The Market Offers an Attractive Discount
Aside from the solid Q2 earnings print and positive consumer sentiment, DAL stock offers another element for short-term speculators to think about — an attractive discount.
Right now, the market prices DAL stock at a forward (projected) earnings multiple of 7.63. In contrast, the air transport sector’s average forward multiple stands at a much loftier 14x. Therefore, investors may do well bidding up Delta stock compared to hot-running enterprises.
In fairness, when a company carries a very low multiple, a risk exists that it’s actually a value trap. However, in Delta’s case, it might be a credible discount. Again, consumer sentiment for the near term is relatively robust. Also, the Fed will try to engineer a soft landing, which means that for the next few months, DAL could fly higher.
Is Delta Air Lines Stock a Buy, According to Analysts?
Turning to Wall Street, DAL stock has a Strong Buy consensus rating based on 16 Buys, zero Holds, and zero Sell ratings. The average DAL stock price target is $59.47, implying 22.95% upside potential.
The Takeaway: DAL Stock Has a Window of Opportunity
With the Fed’s intention of curbing runaway inflation, the longer-term narrative for DAL stock is questionable. However, for those seeking quick upside, the airliner offers an arguably enticing argument. Since consumers are still willing to open their wallets to exercise their revenge travel sentiments, DAL could theoretically bounce higher. As well, the company’s shares trade at a very attractive forward multiple.
