Delta Air Lines (DAL) reported huge revenue growth and a narrower than expected Q2 loss on July 14, but shares fell 1.6% on the news. But Delta stock rallied the next day after Raymond James upgraded DAL stock to strong buy with a 58 price target. But is Delta stock a buy as it tries to rally above its 200-day moving average?
Delta reported an adjusted loss of $1.07 a share, with revenue up 385% to $7.13 billion. The Zacks consensus estimate was for an adjusted loss of $1.37 a share on revenue of $6.39 billion.
“Domestic leisure travel is fully recovered to 2019 levels and there are encouraging signs of improvement in business and international travel,” said CEO Ed Bastian. “We are also opportunistically acquiring aircraft and creating upside flexibility to accelerate our capacity restoration in 2022 and beyond in a capital-disciplined manner.”
Average daily net cash sales — tickets purchased minus refunds — doubled over the first quarter. It was 20% higher than Delta’s initial forecast.
In June, Delta said it plans to hire more than 1,000 reservation agents and roughly 1,000 pilots over the next year.
Delta had $17.8 billion in liquidity at the end of the quarter. Debt and lease obligations totaled $29.1 billion.
DAL Stock Fades After Q1 Earnings
DAL stock reversed lower on April 15 after the company reported first-quarter results. Delta reported an adjusted loss of $3.55 a share and revenue of $4.15 billion. The Zacks consensus estimate was for an adjusted loss of $2.94 a share on revenue of $3.82 billion.
The company said cash burn averaged $11 million a day in the quarter but turned positive in March, to $4 million a day.
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“A year after the onset of the pandemic, travelers are gaining confidence and beginning to reclaim their lives. Delta is accelerating into the recovery with our brand stronger and more trusted than ever before,” Delta CEO Ed Bastian said in the company’s earnings release. “If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses.”
Just ahead of Delta’s earnings report, IBD’s airline group jumped 1.7% on April 14 but the gain faded to 0.2% by the close even though JPMorgan made positive comments about JetBlue (JBLU), Spirit Airlines (SAVE) and Southwest (LUV).
Warren Buffett Sells DAL Stock
Delta stock was in the spotlight in the first half of 2020 on news Warren Buffett boosted his stake in the airline. According to a March 9, 2020, filing, Buffett’s Berkshire Hathaway (BRKA) bought more than 976,000 shares of Delta stock for about $45.3 million.
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But in early May last year, Buffett exited the airline sector entirely as a result of the coronavirus outbreak.
Delta stock still gets weak ratings from IBD Stock Checkup despite a bullish move off its mid-May lows. Its Composite Rating of 34 (on a scale of 1-99 with 99 being the best) ranks it No. 2 in the airline group. Its Relative Strength Rating of 57 ranks it No. 9.
Top-rated stocks in the group include Mesa Air (MESA), Mexico-based Volaris (VLRS), American Airlines (AAL) and Brazil-based Azul (AZUL).
Delta stock remains a top holding of several top-performing mutual funds, including Miller Opportunity Trust (LMPOX) and Primecap Odyssey Aggressive Growth (POAGX).
Is Delta Stock A Buy?
Delta stock gave a buy signal on Feb. 8 when it cleared a flat base with an early entry of 42.74, 10 cents above its Jan. 14 intraday high. Volume swelled to 18.3 million shares on the breakout day, nicely above its average daily volume at the time, of 12.9 million shares. It rallied to a high of 52.28 and has been on a downtrend ever since.
With DAL stock below its 200-day line, it is not a buy now. At this point, it’s best to wait for Delta to move above its 200-day line and then retake its 50-day line with conviction. That would be enough to break DAL stock out of its latest downtrend.
Increased signs of institutional buying, or heavy-volume gains from here, would help lift Delta’s worst-possible Accumulation/Distribution Rating of E and up-down volume ratio of 0.6.
Follow Ken Shreve on Twitter @IBD_KShreve for more market analysis and insight.
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