The Bullish Case for Delta Air Lines (DAL) in 2025

Delta Air Lines (DAL) is flying under the radar.

The company’s performance metrics published in its fourth-quarter earnings report on January 10th may seem modest at first glance: revenues were up just 5% year-over-year as Delta beat its bottom line by only 9 cents. However, there was more to the company’s quarterly report than meets the eye. Arguably, the most important takeaway was the very promising outlook for 2025, especially regarding free cash flow generation and balance sheet strengthening. This, coupled with Delta stock trading at a largely de-risked valuation, especially compared to its legacy peers, sustains my bullish outlook on the stock.

Regarding Delta’s market performance and broader uptrend in operating metrics, the stock did not disappoint with its latest results. Even with the stock trading near its all-time highs, this article explores several reasons why I think it’s still not too late to buy in at current prices.

Recapping DAL’s Q4 Results

Before diving into the bullish thesis on Delta, let’s review the company’s most recent performance figures from Q4 2024. Delta reported an adjusted EPS of $1.85 with revenues of $14.18 billion, compared to expectations of $1.76 with revenues of $14.44 billion by the market.

Breaking it down by geography, here are the key highlights: (1) The domestic market saw a 5% increase in revenues and a 6% rise in capacity, but unit revenues (Total Revenue per Available Seat Mile, or TRASM) dipped by 1%; (2) the Latin American market, Delta’s third-largest, followed a similar pattern: 4% growth in sales, 5% growth in capacity, but a 1% decline in unit revenues; (3) the Atlantic market also posted 4% sales growth, but capacity only grew by 2%, even though overall unit revenues rose by 6%.

Notably, Delta grew its adjusted total unit revenues by only 0.4%, reflecting steady performance based on available capacity but struggling to post significant gains. On the positive side, passenger revenue grew by 5% year-over-year, primarily driven by an 8% increase in premium product ticket sales, which accounted for more than 57% of the sales growth. This is a clear sign that Delta’s focus on cabin segmentation is paying off amid a premium travel boom, which leads to more substantial growth in its higher-margin products.

Positive Catalysts Likely to Boost Ongoing Uptrend in 2025

Moving forward, I believe that Delta Air Lines is in a strong position to be the front-runner in the aviation sector, supported by its strong fundamentals. According to the company’s CEO, Ed Bastian, 2025 is expected to become “the best year in our history,” supported by two key pillars Delta has been building for the past decade: differentiation and durability.

According to its CEO, Delta wants to set itself apart from the rest of the industry, especially with the highest TRASM or unit revenue, at $20.04 (adjusted). For comparison, U.S. legacy competitors like United Airlines (UAL) reported a TRASM of $18.20 in Q3, and American Airlines (AAL) posted a figure of $18.04. Delta is leading the pack, and that’s no small feat.

Another big win for Delta is its focus on financial durability. The Atlanta-based carrier is on track to generate more than $4 billion in free cash flow in 2025, marking a 17.5% growth rate compared to 2024. Mr Bastian has also confirmed that Delta’s free cash flow war chest will be used to strengthen its balance sheet even further. Currently, Delta’s adjusted debt-to-EBITDAR (the “R” stands for rent) ratio stands at 2.6x, down from 3x at the end of 2023, positioning it as one of the most liquid players in the industry. The goal for 2025 is to bring that down to below 2x as Delta works towards a 1x long-term gross leverage target.

Are Delta Airlines Bulls Justified Despite Such Giddy Valuations?

Since stock prices reflect future expectations, Delta shares have surged ~77% over the past twelve months, suggesting the stock’s strong Q4 performance could already be priced into the company’s current share price. The big question airline stock investors probably want answered is: is there still room for additional long positions, given the stock’s extensive growth spurt in recent months? I believe the answer is a firm yes, with plenty of upside still available.

Looking at DAL valuations in greater detail, the company trades at a forward EV/EBITDA multiple of 6x, around 50% lower than the industry average. I’m also intrigued that Delta trades at more discounted multiples than its U.S. legacy peers—United Airlines at 6.7x and American Airlines at 6.6x. For some analysts, including myself, it doesn’t add up for Delta to be trading at a discount to its legacy competitors, especially when its operational performance and fundamentals are superior.

Take Delta’s return on invested capital (ROIC) of 12.9%, for example. By this metric, Delta leads the sector and places the airline giant firmly in the top tier of S&P 500 (SPY) companies. When you combine a strong ROIC with rapidly increasing free cash flow, Delta looks like it’s flying under the radar at its current price of $65 per share.

Is DAL a Buy, According to Wall Street Experts?

Following its Q4 results published this week, twelve analysts have reaffirmed their bullish outlook on Delta stock, with six raising their respective price targets. According to TipRanks, the consensus is a Strong Buy—about as bullish as it gets—with all 16 analysts covering the stock recommending Buy positions. The average price target is $82.67, suggesting a potential upside of around ~26% compared to current prices.

See more DAL analyst ratings

Conclusion

The airline sector isn’t typically considered a compelling option for long-term investing, given the unpredictable nature of the industry and its sensitivity to broader economic activity. However, in my opinion, Delta remains one of the better picks in the sector due to its robust balance sheet and best-in-class operating metrics. Recent Q4 results have reinforced positive sentiment for the stock, thereby supporting its ongoing uptrend and adding extra optimism for its operations in 2025. With a relatively de-risked valuation, I consider DAL worthy of addition to my stock portfolio even as the stock trades near its all-time highs.

Disclosure