Shares of airlines have taken a hit, as evident from the lower trading of the stocks of delta airlines after the emergence of Omicron, a new variant of coronavirus in South Africa. The rise of the new variant has unnerved investors as they struggle to gauge the economic impact. As news and contradictory information about Omicron keep flowing in, it is keeping investors on tenterhooks. But analysts of J.P.Morgan, the US investment bank, believe that investors can think of taking advantage of the sharp fall in share prices at the end of November.
Triggered by one of the most significant sell-off of the year, the stock price of Delta Airlines hit a new one-year low at $35.84 on November 27. It was not Delta alone, but other United, American, Southwest, Spirit, and JetBlue Airlines traded lower by 7% during the same time as the day before Thanksgiving Day. As expected, countries, including the US, are imposing new travel restrictions to slow Omicron. As scientists are yet to understand the South African variant, the fear of the unknown enemy is triggering fresh waves of economic uncertainty. The 7.03% loss of the airlines’ stocks comes in the back of the Transportations sector’s loss of 2.97%, while the S&P 500 gained 3.61%.
Stay firm and steady with Delta stocks
Experts hold faith in the Delta stocks despite the stir caused in the stock markets due to the news of Omicron spreading across more countries, including the US, that dipped the airlines’ shares drastically. From the delta stock predictions by various market experts and analysts, it becomes clear that there is no reason to panic. The dip is momentary, and the stocks are sure to rebound. Analysts who offer 12-month price targets indicate that the shares prices that are currently hovering at a price level below $40 will start moving upwards soon. The turnaround is likely to begin by the end of the year or in the New Year and will continue until July 22 and even beyond.
Reasons for the optimism
Any seasoned investor does not depend on the advice and guidance of the market experts and analysts but does their analysis to verify Delta airlines’ stock predictions. Investors can gain confidence by looking at the company’s performance. According to the forecast by brokerages, Delta is likely to announce third-quarter sales of $8.79 billion, as quoted by Zacks. The range of the sales estimates by various analysts is between $8.24 billion and $9.13 billion. Compared to the sales of $3.97 billion posted for the same period in 2020, the growth rate is 121.4%. We have to wait till January 13, Thursday, when the company will announce the quarterly sales figure.
The estimates of the whole year sale of Delta range between $27.65 billion and $29.56 billion, with an average of $28.99 billion. According to analysts’ forecasts, the sales figure for the year 2022 will be $40.82 on average. The lowest forecast is $38.01 billion, and the highest is $43.92 billion. A survey by sell-side analysts that track Delta Air Lines forms the basis of the average figure.
Earnings data
The earnings data of Delta are pretty encouraging too. The company last posted its earning data where the earning per share for the quarter is $0.30, double the consensus estimate by Thomson Reuters. Delta’s revenue during the quarter was $9.15 billion against analysts’ estimates of $8.46 billion. Delta recorded a negative return on the net margin of 0.28% and had a negative return on equity of 294.36%. On a year-on-year basis, the quarterly revenue went up to 199.0%, and during the same period in the previous year, the company posted an EPS of $3.30.
Research Analysts are focusing on Delta for several reasons. The company moved from a ‘peer perform’ rating to an ‘outperform’ rating. Moreover, the institutional investors have modified the security ratings of Delta. Several investors increased their shareholding in the company. In the second quarter, Vanguard Group increased the shareholdings of Delta Air Lines by 1.4%. Black Rock Inc. increased its stake of shares by 9.4% in the same quarter. Geode Capital Management LLC increased its shareholding in Delta by 2.2%.
As analysts love Delta, you too should love it as well.
