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Delta Stock: Analysts See Strong Double-Digit Upside Potential

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May. 21 2019, Published 7:06 a.m. ET

Bullish stance

Delta Air Lines (DAL) stock could be an intriguing choice for investors, according to Wall Street analysts’ rating. The analysts polled by Reuters have given the stock a consensus ~1.95 rating and a “buy” recommendation. The average target price suggests a strong double-digit upside potential in Delta Air Lines’ stock price over the next year.

Approximately 71% of the analysts have provided a bullish recommendation on Delta Air Lines. Among the 21 analysts covering the stock, seven recommended a “strong buy,” eight recommended a “buy,” and six recommended a “hold.” Analysts’ forward target price of $66.37 on Delta Air Lines signifies a return of 22.3% in the next year.

Delta Air Lines’ better-than-expected quarterly results for seven consecutive quarters drove the bullish sentiment. Also, the airline’s revenues and earnings marked a significant year-over-year improvement in the last seven quarters.

Delta Air Lines is focusing on enhancing its premium product and non-ticket offerings to drive its total revenues. The company’s cost-cutting initiatives are boosting its earnings.

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Going forward, analysts think that Delta Air Lines’ cost-control measures, fleet transformation, and One Delta initiatives will continue to drive its bottom-line results. They also think that the margins will improve in the coming quarters due to the company’s strategy of adding more high-margin business class seats.

Peers’ ratings

Analysts have maintained a bullish recommendation on most US airlines. They have provided a consensus “buy” recommendation on United Airlines (UAL), Spirit Airlines (SAVE), and Alaska Air Group (ALK). United Airlines, Spirit Airlines, and Alaska Air Group’s target prices show a potential upside of ~28%, 45.5%, and 17%, respectively, from their current prices.

Investors could get exposure to passenger airline stocks by investing in the iShares Transportation Average ETF (IYT), which has allocated 16.7% of its fund in the space. So far, IYT has returned 14.2% in 2019. IYT has outperformed the Dow Jones and the S&P 500’s returns of 10.1% and 13.3%, respectively.

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