Delta Airlines Stock Up 3% Today – Time to Buy DAL Stock?

The price of Delta Airlines stock is up 3% this morning in pre-market stock trading action after the company stated that it is experiencing strong demand during the holidays.

Meanwhile, the company said that its adjusted pre-tax profits could rise to $200 million during this last quarter of the year compared to a quarterly loss the market was expecting for the period.

These remarks were made during the Investor Day event that took place today, in which the senior management of Delta Airlines outlined some long-term financial and operating goals for the business for 2024 primarily.

According to the company’s presentation, earnings per share are expected to land at $7 per share by the end of that year while free cash flows should exceed the $4 billion level.

The company also set a target of $15 billion for its long-term debt compared to the $24 billion it currently holds.

What can be expected from this airline stock as the world seems embarked toward what could be the definite end of the pandemic? In this article, I’ll be assessing the price action and fundamentals of Delta Airlines stock to outline plausible scenarios for the future.

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Delta Airlines Stock – Technical Analysis

The price of Delta Airlines stock has been on a downtrend for a while now but the latest price action has formed what could be a bullish pattern known as a falling wedge.

The chart above shows that the price slid sharply during November as concerns related to the appearance of the omicron variant of the COVID-19 virus depressed the short-term outlook for Delta.

Curiously, market participants did not push the price lower to fill the price gap left behind during the November 2020 vaccine-related rally and that creates room for further declines down the road in case the market prefers to fill this gap before pushing the stock higher.

Today’s news are quite encouraging and they come to join other positive developments on the virus front as health experts including Dr. Anthony Faucci – the US Chief Medical Officer – have downplayed the severity of omicron already, stating that a specific vaccine for this strain may not be needed.

Even if the price gap is filled, the falling wedge pattern would remain in play and today’s developments could catalyze a mid-term rise in the price of Delta stock.

Momentum indicators at the moment are not necessarily favoring this view as the Relative Strength Index (RSI) remains at 41 (bearish) while the MACD is still in negative territory even though it is attempting to cross above the signal line.

All things considered, it is possible that the market could turn bullish on DAL stock but confirmation of this rally would come only once and if the price breaks above the falling wedge highlighted above and the stock’s 200-day simple moving average, which is currently standing at $43 per share.

Delta Airlines Stock – Fundamental Analysis

Delta’s EPS target of $7 per share for 2024 is not big news as it would just mean that the company will manage to climb back to pre-pandemic profit levels by the end of that year. This view is in line with Wall Street’s estimates for the company and, therefore, this forecast is a non-event.

Meanwhile, it is interesting that the company abstained from providing guidance for 2022 and 2023. This is due to the multiple factors that could still weigh on its performance in the short and mid-term including negative virus-related developments such as an unexpected increase in infections if the protection provided by initial shots of the vaccine starts to wane.

That said, the introduction of a COVID pill by Pfizer could put a definite end to the pandemic as a perceived threat for companies in the travel and leisure industry.

Overall, the positive catalysts at the moment seem to outweigh the negative factors that could depress the price of Delta stock.

Meanwhile, the company’s 2024 target results in a forward P/E ratio of 5 for Delta Airlines at its current price and this could be an attractive entry for those with the patience and stomach to endure some short to mid-term volatility until the company recoups the territory it lost during the pandemic in terms of profitability.

Overall, the combination of a decent balance sheet, reduced virus-related uncertainties, and a solid path toward recovering its pre-pandemic stand are favoring a long-term bullish outlook for Delta.

As for the short-term, the technical analysis set forth above could determine the next steps that the price action will take depending on whether the falling wedge pattern plays out or not.

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