With shares of Delta Air Lines (NYSE:DAL) trading at around $11.23, is DAL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Delta Air Lines should be on your radar, but does that mean it’s a buy?
Delta Air Lines is focused on paying down debt. If they can reduce their debt to $10 billion by the end of 2013, which is likely, then a dividend payment will be offered beginning in 2014. That’s great news. For Delta Air Lines to even consider a dividend payment means they’re confident about the future.
Delta recently announced a merger with Virgin Atlantic. This is a strategic move because it will increase flights from New York to London from three per day to nine per day. Since Heathrow has no plans to expand, it was the only way in for Delta Air Lines. If you’re wondering why Delta didn’t buy Virgin Atlantic outright, it’s because there are regulations against owning more than a 50 percent stake in an airline that’s headquartered in a different country. This move by Delta Air Lines is one of many over the past few years to increase market share on an international level.
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Another important piece of information is that there is a 1 percent short position on Delta Air Lines, which is miniscule compared to short positions on competitors US Airways Group (NYSE:LCC) and United Continental Holdings (NYSE:UAL). There is an 18.30 percent short position on US Airways Group, and a 10.40 percent short position on United Continental Holdings. This is important because it shows that shorts don’t want to tango with Delta. This has everything to do with Delta’s strong position and future prospects.
Other positives include a Trailing P/E of 6.78, a Forward P/E of 4.59, a positive profit margin (barely), over $3 billion in operating cash flow, and an analyst love affair with the stock. Dahlman Rose just upgraded the stock from a Hold to a Buy and set a $19 price target.
So far, so good, but let’s look under the rug.