U.S. vaccination drives picked up speed throughout the spring, and as such leisure and business travelers began to resume buying up flights. After a long year, airlines were finally getting off the ground, and share prices across the industry began to take off.
Since April’s highs, share prices have steadily declined over the last three months. Today, Delta Air Lines, Inc. (DAL) will be the first major airline to report earnings during pre-market hours. (See Delta Air Lines stock charts on TipRanks)
The ongoing saga is detailed by Savanthi Syth of Raymond James Financial, who wrote that the steady decline in share price can be attributed to rising jet fuel costs as demand goes up, Delta-variant COVID-19 fears, and a general rotation out of the sector by investors.
Syth reiterated a Hold rating and did not declare a price target. She warned investors that although the company has a strong balance sheet, short-term headwinds may lie ahead, posing a challenge for serious gains in share price.
The four-star analyst was enthusiastic that Delta had “the best capital execution” throughout the pandemic, and currently sits in a fiscally advantageous position. She added that due to updated CDC guidelines regarding leniency toward air travel, a domestic recovery in ticket sales could be faster than expected.
As far as concerns surrounding the Delta-variant go, Syth argued that at most, it will only cause the airline a longer-term delay in international business. The new variant of the coronavirus has been surging around the world and is causing some localities to rethink travel restrictions.
Jet fuel costs are dependent on global oil prices, which have increased significantly over the last three months. Delta Air Lines does however own its own oil refinery in Trainer, Pennsylvania, but still saw its oil prices increase by more than 400% by early June since the year prior, Syth added.
On TipRanks, DAL has an analyst rating consensus of Strong Buy, based on 8 Buy and 2 Hold ratings. The average Delta Air Lines price target is $59.29, reflecting a potential 12-month upside of 43.46%. The stock closed trading Tuesday at a price of $41.33 per share.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
