✈️ Delta Air Line's Latest Quarter

Is traveling back? Delta’s quarterly report might know something… April 11, 2024 | Peel #686 Silver Banana goes to... [CapLinked. ]() In this issue of the Peel: - 🌶 The inflation report came out yesterday… and it was way too hot. - 🔴 Zillow gets a bump from Jefferies, but their stock still declines?! - ✈️ Is traveling back? Delta’s quarterly report might know something… Market Snapshot 📸 = Become the office HERO! Time to give Caplinked a try. Become the office hero by ditching those old, tired, and overpriced data rooms for Caplinked. Look, we get it. It's easy to just go with the flow and stick to the same software the partners were using 25 years ago. But hey, this is 2024! It's time to embrace the future and get with the times. Caplinked isn't just a data room; it's your ticket to efficiency, affordability, and simplicity. Make the switch and show your team who is deserving of a promotion. Choose Caplinked, and let's make history together by turning the page on outdated practices. [Be the change your firm needs](=) and enjoy the hero status that comes with it! Macro Monkey Says 🐒 Coming In Hot Uh-oh. We’re feeling like that lady who sued McDonald’s after she spilled coffee on herself because yesterday’s inflation report was clearly just way too hot. Think we can hit JPow and the FOMC with a class action suit? We’ll figure that out later, but it didn’t take markets long at all to figure out that this March Consumer Price Index report is now guilty of stock-price-violence. Add inflation to the list of things that are BACK in 2024, so I guess we’ll have to get into it. The Numbers In March, consumer prices increased by 0.4% for the month and 3.5% annually, higher than expected and the highest annual reading since September. [Source]() Economists had guesstimated that monthly inflation in March would clock in slightly lower than February at 0.3% and roughly on par for the year at 3.4%. And it didn’t get better on the Core Inflation side. Fed Chair JPow and the FOMC barely blink at the CPI’s release, caring much more about the PCE price index, but if they do take a peak at CPI, it’s all focused on Core. As a reminder, Core CPI is the same as headline CPI, but removes food and energy costs as these are considered too volatile… despite the fact that these are 2 of the 3 most important expenses for most consumers (the third being shelter). In March, Core CPI clocked in at 0.4% and 3.8% for the month and year, respectively, both higher than estimates for 0.3% and 3.7%. [Source]() We knew the road back to 2% would be volatile, but this uptick was far from expected. Diving into the data, we can start to see exactly who the culprits were. The usual suspects are back at it, with shelter inflation accounting for over 60% of the annual Core metric. It almost doesn’t matter because of how terribly the BLS accounts for shelter costs, but the agency reported an increase of 5.7% for the year. The vast majority of the shelter cost reading is contained within “Owner’s Equivalent Rent.” To put it nicely, this data is complete garbage, but the BLS reported an increase of 5.9% in this line item. Meanwhile, according to Redfin, actual rental prices increased just 0.8% annually in March: [Source](=) Thankfully, JPow has indicated that the Fed is aware of how sh*tty a job the BLS does at counting shelter inflation, so that should make this uptick less of a cause for concern. But, we saw continued increases in energy costs as well, just not nearly as bad as in February. March’s energy inflation clocked in at just 1.1% compared to the 2.3% reported in the month prior. Egg prices are back at it as well, gaining 4.6% for the month, but overall food costs were relatively tame, accelerating just 0.1% for the month and 2.2% for the year. Lastly, and tragically, we also saw a re-acceleration in the inflation of alcoholic beverages, increasing 0.1% after months of no change at all. Hope you apes can make it… The Takeaway? Unlike the more boring inflation reports we’ve received recently, this one actually seems to have changed the market’s mindset already. [Source](=) As we can see above, markets no longer expect a rate cut at the June FOMC meeting. In just one day, the odds of at least one 25bp cut by the end of the June meeting crashed from over 50% to less than 20% on this CPI print alone. That’s Mr. Market’s schizophrenia back in action. Now, the majority of dollars betting on rate futures aren’t pricing for a 25bp cut until at least September. This is both good and bad, like most things in macro. This suggests growth remains strong and that the U.S. can handle these high rates, but obviously, an uptick in price acceleration feels like the economy just cheated on you. Per CME’s data, nobody is pricing for a rate hike just yet, but let’s see what earnings, March PCE and the April Jobs report have to say about that before we start building our bunkers to survive another rate hike apocalypse. I’ll let you apes know when we officially file that class action lawsuit against Powell. If rates do increase again, like they are in treasury yields, I’m calling Harvey Specter. What's Ripe 🤩 Mind Medicine (MNMD) 📈8.5% - We make fun of the government a lot, but even a blind squirrel finds a nut once in a while. And here, the government’s nut was on psychedelic medicine. - A few weeks ago, the FDA granted breakthrough therapy approval to a Generalized Anxiety Disorder (GAD) treatment from Mind Med. - These days, it seems like everyone on earth has GAD, so markets have been hyped on an enormous TAM, even though their remedy is literal LSD. - Mind Med also announced further trial success for other treatments, including drugs like MDMA, leading to the stock’s >300% gain since November. CAVA Group (CAVA) 📈5.7% - Cava shares have been eating since their IPO last summer, largely giving CPR to the IPO environment. Yesterday, they got some more recognition for it. - Analysts at Argus upgraded the Mediteranean-food version of Chipotle, arguing that now’s the time to buy the dip on hopes for a “long runway to growth.” - Shares are up over 65% all-time, over 54% this year, yet have gone relatively flat over the last month. What's Rotten 🤮 SoundHound AI (SOUN) 📉7.0% - Hot d*amn—after a more than a super cool and chill 420% rise in about 5 weeks from early Feb to mid-March, SoundHound is looking to cash in. - Much like SMCI, SoundHound has taken stock (no pun intended) of its recent rise and decided that using this high valuation to raise funds is worth it. - The speech AI platform is selling up to $150mn in equity to fund expansion, causing the short-term pain of dilution for (fingers crossed) long-term benefit. Zillow (Z) 📉6.0% - It’s a slap in the face when a stock rises on a CEO leaving, but this is a kick to the you-know-where. Jefferies upgraded Zillow, and shares cratered. - Zillow stock has lost >22% since the NAR ruling, as the idea is that the ruling lowers the values of Zillow’s Premier Agent services to buying agents. - But according to Jefferies ([and us](=)), this won’t have a long-term material impact. The market disagrees and doesn’t give a damn, but more shares for us! Thought Banana 🤔 Earnings Spotlight: Delta Air Lines (DAL) Delta shares were about as volatile as your average flight in a piece of sh*t Boeing plane on Wednesday. The stock took off at market open, only to descend to a landing of -2.3% by the end of the day. Let’s find out exactly why and what this might mean for other airlines, the travel boom, and the odds of a door flying off your next Delta flight. The Numbers The hype shares got at market open was largely due to Delta’s profitability. This is Delta’s first profitable Q1 in 5 years. The first quarter generally involves the least travel as, outside of Spring Break, the weather sucks *ss in most of the Northern Hemisphere, rendering vacations pointless, and there are no major travel Holidays. Returning to profitability in their first quarter was a much-needed W for this airline stock, proving they can make money during their worst quarter of the year. Guidance was a big tailwind, too, with the firm projecting Q2 EPS of $2.20-$2.50, bringing the midpoint well above the Street estimate of $2.23. Two of the most important line items in the report, business travel and passenger traffic, showed strong performance as well. Business travel saw a 14% increase as overworked consultants and MDs avoiding their families returned to the skies. Plus, the total passenger count set a record for the quarter, indicating the travel boom rages on for both pleasure and professional reasons. Unit economics are improving as well, with Delta’s cost per unit (excluding oil) rising just 1.5% while revenue per unit rose 3% annually thanks to passenger traffic setting records for Q1. Who Cares? = [Source](=) The big takeaway from Delta’s report isn’t anything to do with Delta, but the U.S. travel industry as a whole. We can see this in the company’s numbers and in the above chart that, even 4 years after C-19 hit, demand for travel keeps increasing. Experts speculated that travel demand post-pandemic would spike for a short time and then fizzle down to pre-pandemic levels, but U.S. passengers have decided that getting—and staying—away from home is their top strategy for life enjoyment. Can’t really blame them. Even as consumers pull back on discretionary spending in areas like restaurants and clothing, asking us to pull back on travel is like asking a dog not to tweak out when they hear the word “walk” or “treat.” Other airlines got in on the opening gains as well, only to give them back throughout the day thanks to fears around increases in rates and fuel costs stoked by the CPI report. Even United, who recently had a damn engine blow up (shoutout [Boeing again](), gained 2% at the open. Somehow, Boeing managed to lose less than the airlines whose passengers it keeps trying to kill, losing 2.0% on the day. 💭 The Big Question 💭: Is the “travel boom” not actually a “boom” and more of a long-term change in consumer spending allocation? Will other airlines report similar numbers? How much will energy costs increase, and how will this affect share prices in 2024? Banana Brain Teaser 💡 Previous 🗓 Cheryl purchased 5 identical hollow pine doors and 6 identical solid oak doors for the house she is building. The regular price of each solid oak door was twice the regular price of each hollow pine door. However, Cheryl was given a discount of 25% off the regular price of each solid oak door. If the regular price of each hollow pine door was $40, what was the total price of all 11 doors? Answer: $560 Today 🕐 A certain store will order 25 crates of apples. The apples will be of three different varieties: McIntosh, Rome, and Winesap- and each crate will contain apples of only one variety. If the store is to order more crates of Winesap than crates of McIntosh and more crates of Winesap than crates of Rome, what is the least possible number of crates of Winesap that the store will order? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “If you want to be a millionaire, start with a billion dollars and launch a new airline.” — Richard Branson How Would You Rate Today's Peel? 😁[All the bananas]() 😐[Meh]() 😩[Rotten AF]( Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA]( // [ACADEMY]( // [COURSES](=) // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353