Should You Reassess Delta After Airbus Engine Replacement and Recent Stock Dip in 2025?

If you have Delta Air Lines in your portfolio, you are probably eyeing the stock and asking, "Should I hold, buy more, or look elsewhere?" After all, this is an airline with a lot going on; recent headlines have been a mixed bag, and the price action reflects that. Over the last week, Delta's stock dipped 4.3%, while the month saw a broader decline of 6.6%. Year to date, the stock is down 3.2%. But step back a bit further and you will see some real resilience: Delta has soared 12.3% over the past year and a hefty 108.9% in the last three years. That kind of long-term growth shows that investors still see solid potential here, even as recent turbulence, like the Airbus fume unit replacements or legal settlements, have hit the headlines.

What is really interesting though is how the market is valuing Delta right now. According to the latest value score, Delta clocks in at 5 out of 6 possible checks for being undervalued. In plain English, it means Delta looks attractively priced on most fronts, despite the recent noise and a slight pullback in the stock.

So, how does Delta stack up when we put it under the microscope of different valuation methods? Let's break down the main approaches, and at the end, I will share an even better way to really get a handle on what Delta might be worth going forward.

Why Delta Air Lines is lagging behind its peers

Approach 1: Delta Air Lines Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model works by estimating a company's future cash flows and discounting them back to today's value. This method gives a data-driven picture of what a business might really be worth, beyond quick fixes or short-term fluctuations in the stock price.

For Delta Air Lines, the latest DCF uses a two-stage Free Cash Flow to Equity approach. Right now, Delta's last twelve months Free Cash Flow sits at $1.64 billion. Projections are even more optimistic, as Delta's Free Cash Flow is expected to more than double and reach over $3.8 billion by 2028 according to the most recent analyst estimates and model projections. Looking further ahead, Simply Wall St extrapolates these estimates out for a decade and suggests continued growth well into the 2030s.

The numbers tell a bullish story. The model calculates Delta's intrinsic value at $67.19 per share, about 14.9% higher than where the market is currently pricing the stock. That means, based on cash flow expectations, the stock is undervalued in the eyes of this classic valuation tool.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Delta Air Lines.

Our Discounted Cash Flow (DCF) analysis suggests Delta Air Lines is undervalued by 14.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Delta Air Lines Price vs Earnings

The price-to-earnings (PE) ratio is one of the most reliable tools for valuing profitable companies like Delta Air Lines. It shows how much investors are willing to pay today for each dollar of a company's earnings, making it a quick snapshot of market sentiment. A fair PE ratio depends not only on a company's current profits but also on expectations for its growth and the risks tied to its future performance. The higher the growth prospects and the lower the risk, the more investors are usually willing to pay, resulting in a higher PE multiple.

Looking at the numbers, Delta’s current PE sits at just 8.3x, well below the average for the Airlines industry, which is 9.4x. It is also further from the peer average of 21.3x. On the surface, this suggests that Delta is trading at a discount compared to its direct competitors and the sector overall.

However, Simply Wall St’s proprietary “Fair Ratio” offers a more tailored benchmark for valuation. Unlike simple peer or industry comparisons, the Fair Ratio provides a deeper analysis by factoring in earnings growth forecasts, profit margins, the company's market cap, and risk profile, along with industry influences. For Delta, the Fair Ratio is calculated at 12.8x, reflecting what investors might reasonably pay for its unique fundamentals and future outlook.

Comparing Delta's current PE of 8.3x to its Fair Ratio of 12.8x suggests the stock is attractively valued right now. It is trading below what would be expected given its growth and risk profile, highlighting a potential opportunity for long-term investors.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Delta Air Lines Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a story you create about a company by connecting your own view of its future growth and risks to the numbers, such as estimated future revenue, earnings, and margins. Essentially, it turns your perspective into a transparent, testable financial forecast and then calculates your fair value for the stock.

On Simply Wall St’s Community page, millions of investors use Narratives as an easy, accessible tool to make smarter investment decisions by stating their case and seeing how that Narrative stacks up against others. Narratives help you decide when to buy or sell by highlighting how your estimated fair value compares with today’s price, and automatically update when new information, like earnings or market news, comes in so you are always working with the latest outlook.

For example, some investors think Delta deserves a fair value of $90 per share based on future earnings potential, while others believe $49 is more appropriate given current industry risks. This demonstrates how Narratives can reflect different investor perspectives and make your decision process more dynamic and actionable.

Do you think there's more to the story for Delta Air Lines? Create your own Narrative to let the Community know!

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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