Delta Air Lines (DAL): Reassessing Valuation After Earnings Beat and Upgraded Guidance

Delta Air Lines (DAL) is back in the spotlight after beating revenue expectations and raising its earnings outlook, as investors weigh how its premium strategy and Amex partnership could reshape long term profitability.

See our latest analysis for Delta Air Lines.

That upbeat guidance is landing against a strong backdrop, with the share price at $67.24 and a 20.83% 1 month share price return suggesting momentum is building after robust Q3 results and resilient demand. The 3 year total shareholder return of 106.13% underlines how the long term story has already rewarded patient holders.

If Delta’s recent move has you rethinking the whole travel and mobility theme, it could be worth exploring other opportunities among auto manufacturers to see how the market is pricing different cyclical stories.

With the stock near recent highs yet still trading at a sizeable intrinsic discount and only modestly below analyst targets, the key question now is whether Delta remains undervalued or if the market is already pricing in its next leg of growth.

Most Popular Narrative Narrative: 12.4% Overvalued

According to PittTheYounger, the latest fair value estimate now sits below Delta’s $67.24 share price, reframing earlier upside assumptions after shifting demand signals.

Yet with its early warning about waning travel demand in March, my original assumptions in February regarding revenue growth and future PE had to be revised downwards from 4 to 2 per cent p.a. and 12, respectively. This resulted in a fair value of about $53.50 a share. After DAL's quarterly numbers as of 9 April and the related poor visibility for the remainder of the year, I have to lower my anticipated PE further to 11, leading to a new fair value of about 49 bucks a share that still leaves some upside.

Read the complete narrative.

Want to see the math behind that downgrade, and why the narrative still gives Delta a premium earnings multiple and resilient margins, despite softer growth assumptions?

Result: Fair Value of $59.84 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, investors should watch for renewed trade tensions or a sharper than expected pullback in travel demand, either of which could quickly erode Delta’s premium.

Find out about the key risks to this Delta Air Lines narrative.

Another Take on Value

Our SWS DCF model paints a far more optimistic picture, putting fair value at $109.07, around 38% above the current $67.24 price. That clash with PittTheYounger’s $59.84 estimate raises a simple question: which view of Delta’s future cash flows do you trust more?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Delta Air Lines Narrative

If you see Delta’s story differently or simply want to dig into the numbers yourself, you can build a custom view in just minutes using Do it your way.

A great starting point for your Delta Air Lines research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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