Just as air travel starts to come crawling back from the depths, another COVID-19 variant seems to knock the industry back down. This has been true yet again for the ongoing Omicron variant, which has considerably reduced both the leisure and corporate demands for travel, at least for the next month or so. Delta Air Lines, Inc. (DAL) has felt this near-term impact, although its long-term prospects appear much brighter.
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Spelling out her hypothesis on the matter is Sheila Kahyaoglu of Jefferies Group, who sees a high potential for upside despite the current headwinds and operating losses sustained by Delta. She pinpointed several major trends which could lift the stock back into the air by the spring.
Kahyaoglu rated the stock a Buy, and provided a price target of $50 per share. This target currently represents a 12-month upside of about 27%, as of intraday trading on Thursday.
The four-starred analyst asserted that an uptick in premium pricing could offer deeper revenues for DAL. She is also optimistic about the effects on the airline from a strong return of transatlantic travel. The firm is more exposed to the international market than its peers, which can be seen as a growth driver, considering the high level of domestic competition.
Moreover, the analyst wrote that the $25.04 billion market cap company remains one of the best stocks to buy in 2022, when it comes to airlines. Kahyaoglu’s projections rely on robust rebounds in both corporate and leisure travel in order for the short-term headwinds to actually stay short. She added that Delta “is the best way to participate in the next phase of the recovery,” despite its historically high valuation.
Regarding the current staffing issues, Kahyaoglu anticipates they will subside by the end of this month.
Just as with many airlines, Delta’s Premium section is far more profitable than its Economy Class section. The airline is undergoing an expansion of its premium offering from 27% to over 30%, and by 2024 expects to have increased its total passenger capacity by 25%.
On TipRanks, DAL has an analyst rating consensus of Strong Buy, based on 12 Buy and three Hold ratings. The average Delta Air Lines price target is $51.79, reflecting a possible 12-month upside of 32.29%.
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