Delta Airlines Stock Analysis

Delta Airlines Stock Analysis

Delta Airlines (WKN: A0MQV8 ISIN: US2473617023 Industry: Airlines Country: USA) Stock Analysis 10/17/2020.

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Sector Analysis:

Delta Airlines is the second largest airline in the world in terms of revenue. Only Southwest Airlines, also USA, is bigger. The airline industry was last hit hard by the corona virus. In an industry comparison, Delta Airline can be compared with its competitors.

Delta Airlines

Price-to-book-ratio (P/B): 1.32

Price-to-earnings-ratio (P/E): 4.35

Peer Group

Price-to-book-ratio (P/B): 1.9

Price-to-earnings-ratio (P/E): 6.7


The industry comparison shows that other airline stocks are currently more expensive than Delta Airlines stocks. Measured in terms of P/B and P/E, Delta Airline is cheaper than other industry representatives.

AIR TRAFFIC AND PASSENGER VOLUME

Air traffic and passenger volume corona pandemic

Stock-Performance Delta Airline

Delta Airlines Stock performance during corona pandemic

The comparison of the passenger volume in North America and the performance of the Delta share shows that the Delta Airline share is strongly correlated with the passenger volume, but the passenger volume is increasing faster than the Delta share.

Passenger Volume

Reduction during Corona pandemic: -60%

Recovery since low point: +90%

Stock Performance Delta Airlines

Reduction during Corona pandemic: -60%

Recovery since low point: + 40% 


While the share price followed the curve of the passenger volume during the downturn, the current recovery phase shows that the share price of Delta is lagging behind. Here the passenger volume is 50% higher than the stock price.

Fair Value Analysis:

By calculating the fair price (fair value) of the share, it can be determined whether the share is currently cheap or expensive. We use several different approaches to calculate fair value. A calculation of the fair value is very difficult due to the current market conditions. The following fair values show the value of the Delta Airline share if business recovers at the pre-crisis level. Overview of the fair value analyzes of the Delta Airlines share:

Fair Value Calculator

2019: 160 USD

2021e: 67 USD

DCF Fair Value

2019: 145 USD

2021e: 46 USD

Quality Fair Value

2019: 109 USD

2021e: 45 USD


Should Delta Airline be able to build on old successes before the Corona crisis within the next 2 years, the fair value for Delta Airline will be around 130 USD. The current fair value of Delta Airlines would therefore be around USD 52. Delta Airlines' current market price is USD 31.

Fair P/E Ratio and Quality:

The Fair Value Calculator quality check analyzes the soft quality factors of the Delta Airlines share. This includes the analysis of the management, the product and the market environment. With the Total Value Score Ranking you can check the Delta share for the financial key figures:

Fair P/E Ratio

15

Total Value score

7/10


If the stock is trading below a P/E of 15, the stock looks cheap. With a total value score of 7 out of 10 points, the Delta Airline share appears to be in a good financial position. Of course, Delta's current business is very gloomy. With a daily cash burning rate of $ 19 million, of course, the question of survival is an issue. The current annual report shows liquid funds amounting to 21.6 billion US dollars. Delta will lose 6.9 billion a year if business continues to develop as it did in Q3 2020. This leaves the company with a theoretical survival time of 3.13 years. If the passenger numbers continue to develop as before, Delta Airline should be able to work profitably again by the end of 2021 and thus overcome the Corona crisis.

Quality, Brand and Management

A passenger survey from 2019 showed that Delta Airlines was the most popular airline in the USA in 2019. This makes Delta Airline a strong brand and customers trust the brand and will continue to trust this brand in the future. Click here for the complete ranking of the best airlines from the Wall Street Journal. The company has been reformed and reorganized since the 2000s, so the management could already prove that it is able to overcome severe crisis. This could be necessary again during and after the Corona crisis. Delta also shines as an employer: Delta Airlines was named Great Place to Work as one of the best places to work for millennials.

Momentum and Relative Strength:

The company's relative strength is one of the most important alpha factors in stock research. Only stocks with high relative strength and momentum can beat the market. The relative strength describes with which factor the share performs in comparison to the overall market (if the share performance corresponds to the market performance, the relative strength would be 1).

Relative Strength 12 Months

Delta: 0.19

Overall Airline industry: 0.15

Relative Strength 6 Months

Delta: 1.44

Overall Airline industry: 0.81


The Delta Airlines share naturally performed worse than the overall market last year, as the flight industry is of course directly affected by the Corona crisis. What is also positive here, however, is that the share has lost less value than other competitors and has performed much better than other industry representatives in the last 6 months. With a relative strength that is almost twice as high as that of the industry, this shows the strength of this stock.

Growth & PEG Ratio

The growth figures and the price-earnings-growth-ratio indicate if the price is low due to strong growth. A comparison of the growth to the peer group rounds off the multiples comparison.

Growth Delta

+8.4%

Growth Industry

+2.88%

PEG Delta

0.5

PEG Industry

2


Delta Airlines shares are also convincing in the growth and PEG ratio comparison. The stock can grow faster than the rest of the industry and is valued cheaply by price and growth.

Conclusion:

As early as the early 2000s, Delta Airlines demonstrated that crises are handled excellently. Even now during the Corona crisis, management was able to quickly reduce the cash burning rate. In addition, Delta Airline has a well-balanced fleet, which enables flexible work as required, as all aircraft types of all sizes can be mapped evenly. 

The quality analysis proves that Delta Airlines is an excellent company. A current P / E ratio cannot be meaningfully calculated due to the current losses, but the fair P / E ratio of 15 is significantly higher than the expected P / E ratios. The fair value analysis also shows that the airline is cheap. Based on the fair values, the short-term price targets for 2020 are USD 52 and the longer-term price targets for 2021/2022 are USD 130. With high profitability and flexibility and a significantly stronger relative strength, the Delta Airline share should develop 1.6 times better than the market in the next few years. The financial situation is stable and US government could support the economic situation. The discrepancy between the increase in passenger numbers and the recovery in the share price suggests a 50% gap that is likely to be closed within the next few years. The low oil prices are also favoring a quick recovery after the Corona crisis. Delta Airline's stock analysis can therefore be rated positively.

If you are looking for a stock that should recover quickly after Corona, there you go!


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