Delta Airlines Gets a Price Target Boost from Morgan Stanley

Delta Airlines, one of the major players in the aviation arena has received a price target bump from Morgan Stanley who sees an over 37% rally ahead for the stock.

Morgan Stanley raised their stock price forecast on Delta Airlines to $55 from $51 and is optimistic about the airline space, citing a decent Q1 guide and bullish commentary on the call about the potential for a traffic rebound, particularly in corporate.

It was last week that Delta Airlines reported a loss for the fourth consecutive time in the December quarter and a full-year 2020 loss for the first time in 11 years amid COVID-19. Delta reported a quarterly adjusted loss of $2.53​​ per share, coming in higher than the Wall Street consensus estimate of $2.47​​ per share loss.

Delta CEO Ed Bastian has said however that he expects 2021 to be the year of recovery.
“Despite coming into the new year on the back of tough 4Q traffic numbers amidst a third pandemic wave and the prospect of 1Q somewhat bereft of catalysts, we are very encouraged by mgmt’s confident tone on the conference call with a clear line of sight to the other side of the pandemic. We think this should result in a tide that will continue to rise and lift the airline stocks with it,” wrote Morgan Stanley analyst Ravi Shanker.

“We believe Delta Airlines’ (DAL) strong customer loyalty/franchise, corporate relationships, footprint, historical PRASM/margin strength, balance sheet and mgmt. team leave them well-positioned amongst legacy peers to participate in the rebound, with the potential for an upside surprise if international/corporate volumes/PRASM can surprise to the upside in 2H21/1H22. Long-only investors returning to the sector as traffic comes back are also likely to flock to DAL, in our view, which makes the technical setup attractive as well. Our 2021/2022/2023 EPS moves to -$1.42/4.33/7.52 vs. $0.91/4.80/NA prior,” the analyst added.

Credit Suisse also raised the target price on Delta to $48 from $47 while Stifel upped the stock price forecast to $49 from $39. JP Morgan however lowered the price objective to $49 from $51.

Morgan Stanley has a target price of $86 under a bull-case scenario and $29 under the worst-case scenario. The firm currently has an “Overweight” rating on the stock.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.