Delta’s Stock Flies Airline Demand Soars

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Airline Stock Searches in the Last Month Rank Name Searches #1 'American Airlines Gp 75 #2 'Delta Air Lines Inc 68 #3 'Southwest Airlines Company 46 #4 'United Airlines Holdings Inc 40 #5 'Spirit Airlines Inc 14 #ad [Investing made easy with a daily quick read]( Brought to you by [Masterworks]( [Microsoft Co-Founder’s $1.5B+ Sale Highlights “Safe Haven” Asset]( [Masterworks - Microsoft Co-Founder’s $1.5B+ Sale Highlights “Safe Haven” Asset]( Last November, Paul Allen’s historic art collection shattered the record for largest ever sale in auction history. The fact that the blue-chip art market is still setting records amid major drawdowns in financial markets, and macroeconomic turmoil, highlights why it can be such a strong alternative diversifier. 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The backlog for Airbus and Boeing stretches years into the future as consumer airline travel closes in on pre-pandemic levels. A combination of aging aircraft, carbon emissions goals, and supply chain constraints left airlines scrambling for new planes. Not to lose out on the opportunity, airlines cut capacity and raised prices. One of the big winners has been Delta Airlines (DAL), the second most searched airline stock amongst financial pros in the last month. Shares are up almost 20% in the last month, flying well ahead of the broader market. Yet, the stock is still down almost 14% over the last five years. So, is this stock ready for take-off, or has it popped out its landing gear? Delta Airlines’ Business We’re not going to bother pretending that you don’t know who Delta Airlines is and what they do. So, let’s talk about what you don’t know. Delta operates almost 1350 aircraft, a couple hundred behind United Airlines (UAL), the world’s largest. Management pointed out that despite revenues rebounding, travel volume is still well below pre-pandemic levels. [Industry demand] [Industry backdrop] [Source: Delta Airlines Q1 2023 Presentation]( Delta’s put together a 5-point plan to guide its next few years. [Competitive advantages] [Source: Delta Airlines Q1 2023 Presentation]( While they highlight customer loyalty and their brand, many industry analysts see loyalty programs eroding as airline lounges fill to capacity. Yet, Delta’s apparently bucking the trend with premium revenues and non-ticket sales growing at a faster rate than main ticket sales. [Revenue diversification] [Source: Delta Airlines Q1 2023 Presentation]( Plus, Delta’s made significant strides in improving its operational efficiency. [Capacity growth] [Source: Delta Airlines Q1 2023 Presentation]( Financials [Financials] Source: Stock Analysis Like most airlines, Delta barely survived the pandemic. Revenues basically vanished. It wasn’t until 2022 they rebounded. Margins have been improving and will likely continue. In fact, management’s outlook puts operating margin for 2023 between 10%-12% and 13%-15% by 2024, returning to where it was in 2019. The company also plans to reduce its debt-to-EBITDA ratio from 5x in 2022 to 2x-3x by 2024, slightly higher than the 2x in 2019. [Financial plan] [Source: Delta Airlines Q1 2023 Presentation]( Considering the stock was trading at $60 before the pandemic, that leaves a lot of upside potential. Valuation [Valuation] Source: Seeking Alpha All airlines trade at cheap multiples. American Airlines (AAL) sits at a paltry 6.0x earnings and 2.5x cash. Only United is cheaper on the price-to-cash ratio at 2.2x. Delta’s twice as expensive at 4.0x. Low-cost carriers like Southwest (LUV) and Spirit Airlines (SAVE) don’t trade at nearly as deep of a discount. Growth [Growth] Source: Seeking Alpha Delta’s revenue growth was substantial and is set to continue, though at a slower pace. That’s the same story for all the carriers. Profitability [Profit] Source: Seeking Alpha Delta has the worst gross margins at the moment. However, its net income margin is in-line with others. And its forecast for improvements would put it well ahead of its peers. [The Most Researched Tickers [FREE REPORT]]( Once every quarter, we compile millions of Financial Professional and Retail Investor's stock searches across our 100+ financial sites. We reserve this exclusive report for our newsletter subscribers so you can learn about the stocks and industries that you should keep an eye on. This info can help you decide what to do in your portfolio – so you can protect the money you have and generate bigger gains. [Click here now to download the FREE Trackstar Q1 2023 Report.]( Our Opinion 10/10 Airlines are a steal, right here, right now. Delta’s got the best track record of meeting their forecasts, though United likely has the most upside at the moment. Nonetheless, we expect Delta to adjust to changing conditions and creating a more sustainable future. 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