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DAL Stock Down 16.6% in a Month: Is it a Golden Buying Opportunity?
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Delta Air Lines (DAL - Free Report) stock has plunged 16.6% over the past month despite strong air travel demand. The stock has fared badly recently, mainly due to the heating up of tariff-related tensions. Lawsuits filed against Delta and its subsidiary, Endeavor Air, following the crash involving Delta Flight 4819, at Toronto Pearson International Airport on Feb. 17, 2025, have also contributed to the decline in DAL shares.
DAL stock’s double-digit decline over the past month compares unfavorably with the S&P 500 index, the Zacks Transportation – Airline industry and the Zacks Transportation sector.
One-Month Price Comparison
Image Source: Zacks Investment Research
Given the significant pullback in DAL’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy DAL? Let’s find out.
Legal Challenges Follow DAL Plane Mishap
On Feb. 17, 2025, a Delta plane, operated by its subsidiary Endeavor Air, crash-landed in Toronto. Fortunately, all 80 people on board survived. The incident occurred amid windy conditions following a snowstorm at Toronto Pearson International Airport. The plane flipped upside down during landing. The ill-fated flight took off from Minneapolis-Saint Paul International Airport.
However, following the incident, Motley Rice LLC, a leading plaintiffs’ litigation firm, filed a federal lawsuit in the U.S. District Court for the Minnesota district, Minneapolis Division, against Delta and Endeavor Air, alleging that the flight crew failed to adhere to standard landing procedures. The lawsuit also alleges that inadequate training and supervision contributed to the crash. The lawsuit seeks compensation in accordance with international aviation law (the Montreal Convention), including damages for physical and emotional injuries sustained during the crash.
The allegation of negligence may have displeased investors due to concerns regarding potential financial outflow and reputational impact.
Tariff Tensions Weigh on DAL Stock
Tariff-induced uncertainty has also contributed to DAL stock’s unsatisfactory performance on the bourse of late. The trade war between the United States and its biggest trading partners — Canada, Mexico and China — is likely to have an adverse impact on DAL’s business.
President Donald Trump’s imposition of a 10 percent tariff on energy resources from Canada is a big blow to airline operators, including DAL, as the resultant high fuel prices would hurt their profit margins. This is because the health of airlines is inversely related to fuel prices since expenses on fuel represent a key input cost for these companies. An increase in fuel price will hurt the bottom line of airline operators like DAL.
The imposition of higher tariffs on goods imported from Canada and Mexico has given rise to fears that higher ticket prices, production costs and currency woes could all impact air travel. In the event of these tariff-related tensions lasting for long, the airline manufacturing supply chain could be significantly disrupted. Carriers may start leasing more jets, and an increase in demand for leasing could result in rates moving north. This is likely to put upward pressure on ticket prices, hurting air travel in turn.
Not All Brickbats, Some Roses as Well for DAL Stock
Highlighting its shareholder-friendly stance, DAL’s management resumed paying quarterly dividends of 10 cents per share last year after a COVID-induced hiatus. In June 2024, management announced a 50% hike in its quarterly dividend payout. This was the first dividend increase announced by DAL since the resumption of its quarterly dividend payments last year. Under the CARES Act, airlines were prohibited from paying dividends or buying back shares till Sept. 30, 2022. Following the increase, the new quarterly dividend was 15 cents per share (annualized 60 cents per share).
Delta expects the recently witnessed acceleration in co-brand card spending and air travel demand from corporates to continue in 2025. Delta’s liquidity position is also encouraging. The airline ended fourth-quarter 2024 with cash and cash equivalents of $3.1 billion, much higher than the current debt level of $2.2 billion. This implies that the company has sufficient cash to meet its current debt obligations. DAL's efforts to repay its debts are encouraging, too. As a matter of fact, the company’s times interest earned ratio of 8.4 compares favorably with the industry’s ratio of 4.8.
A good liquidity position gives operational flexibility, while a dividend hike indicates cash flow stability and a shareholder-friendly stance. Maintaining its strong cash-generating ability, DAL expects to generate more than $4 billion of free cash flow in 2025. This further supports its continuous efforts to reduce debt and bring down the leverage ratio to two times or less.
As a result, despite the headwinds mentioned in the writeup, analysts are optimistic about the stock and upwardly revising earnings estimates.
Image Source: Zacks Investment Research
Delta Air Lines is Undervalued
Deltalooks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.57, DAL stock trades at a significant discount to industry levels, the S&P 500, and fellow airline operators, Southwest Airlines (LUV - Free Report) and SkyWest (SKYW - Free Report) .
DAL’s P/S F12M Vs. Industry, S&P 500, LUV & SKYW
Image Source: Zacks Investment Research
DAL Stock is a Buy Now
Despite the tariff-induced challenges, legal issues and high labor costs (expenses on salaries and related costs were up 11% in 2024), we think DAL is well-positioned to dodge the challenges. Efforts to reduce debt, strong liquidity and shareholder-friendly initiatives are supporting growth. DAL’s valuation adds to the layer of positives.
Image: Shutterstock
DAL Stock Down 16.6% in a Month: Is it a Golden Buying Opportunity?
Delta Air Lines (DAL - Free Report) stock has plunged 16.6% over the past month despite strong air travel demand. The stock has fared badly recently, mainly due to the heating up of tariff-related tensions. Lawsuits filed against Delta and its subsidiary, Endeavor Air, following the crash involving Delta Flight 4819, at Toronto Pearson International Airport on Feb. 17, 2025, have also contributed to the decline in DAL shares.
DAL stock’s double-digit decline over the past month compares unfavorably with the S&P 500 index, the Zacks Transportation – Airline industry and the Zacks Transportation sector.
One-Month Price Comparison
Given the significant pullback in DAL’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy DAL? Let’s find out.
Legal Challenges Follow DAL Plane Mishap
On Feb. 17, 2025, a Delta plane, operated by its subsidiary Endeavor Air, crash-landed in Toronto. Fortunately, all 80 people on board survived. The incident occurred amid windy conditions following a snowstorm at Toronto Pearson International Airport. The plane flipped upside down during landing. The ill-fated flight took off from Minneapolis-Saint Paul International Airport.
However, following the incident, Motley Rice LLC, a leading plaintiffs’ litigation firm, filed a federal lawsuit in the U.S. District Court for the Minnesota district, Minneapolis Division, against Delta and Endeavor Air, alleging that the flight crew failed to adhere to standard landing procedures. The lawsuit also alleges that inadequate training and supervision contributed to the crash. The lawsuit seeks compensation in accordance with international aviation law (the Montreal Convention), including damages for physical and emotional injuries sustained during the crash.
The allegation of negligence may have displeased investors due to concerns regarding potential financial outflow and reputational impact.
Tariff Tensions Weigh on DAL Stock
Tariff-induced uncertainty has also contributed to DAL stock’s unsatisfactory performance on the bourse of late. The trade war between the United States and its biggest trading partners — Canada, Mexico and China — is likely to have an adverse impact on DAL’s business.
President Donald Trump’s imposition of a 10 percent tariff on energy resources from Canada is a big blow to airline operators, including DAL, as the resultant high fuel prices would hurt their profit margins. This is because the health of airlines is inversely related to fuel prices since expenses on fuel represent a key input cost for these companies. An increase in fuel price will hurt the bottom line of airline operators like DAL.
The imposition of higher tariffs on goods imported from Canada and Mexico has given rise to fears that higher ticket prices, production costs and currency woes could all impact air travel. In the event of these tariff-related tensions lasting for long, the airline manufacturing supply chain could be significantly disrupted. Carriers may start leasing more jets, and an increase in demand for leasing could result in rates moving north. This is likely to put upward pressure on ticket prices, hurting air travel in turn.
Not All Brickbats, Some Roses as Well for DAL Stock
Highlighting its shareholder-friendly stance, DAL’s management resumed paying quarterly dividends of 10 cents per share last year after a COVID-induced hiatus. In June 2024, management announced a 50% hike in its quarterly dividend payout. This was the first dividend increase announced by DAL since the resumption of its quarterly dividend payments last year. Under the CARES Act, airlines were prohibited from paying dividends or buying back shares till Sept. 30, 2022. Following the increase, the new quarterly dividend was 15 cents per share (annualized 60 cents per share).
Delta expects the recently witnessed acceleration in co-brand card spending and air travel demand from corporates to continue in 2025. Delta’s liquidity position is also encouraging. The airline ended fourth-quarter 2024 with cash and cash equivalents of $3.1 billion, much higher than the current debt level of $2.2 billion. This implies that the company has sufficient cash to meet its current debt obligations. DAL's efforts to repay its debts are encouraging, too. As a matter of fact, the company’s times interest earned ratio of 8.4 compares favorably with the industry’s ratio of 4.8.
A good liquidity position gives operational flexibility, while a dividend hike indicates cash flow stability and a shareholder-friendly stance. Maintaining its strong cash-generating ability, DAL expects to generate more than $4 billion of free cash flow in 2025. This further supports its continuous efforts to reduce debt and bring down the leverage ratio to two times or less.
As a result, despite the headwinds mentioned in the writeup, analysts are optimistic about the stock and upwardly revising earnings estimates.
Delta Air Lines is Undervalued
Deltalooks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.57, DAL stock trades at a significant discount to industry levels, the S&P 500, and fellow airline operators, Southwest Airlines (LUV - Free Report) and SkyWest (SKYW - Free Report) .
DAL’s P/S F12M Vs. Industry, S&P 500, LUV & SKYW
DAL Stock is a Buy Now
Despite the tariff-induced challenges, legal issues and high labor costs (expenses on salaries and related costs were up 11% in 2024), we think DAL is well-positioned to dodge the challenges. Efforts to reduce debt, strong liquidity and shareholder-friendly initiatives are supporting growth. DAL’s valuation adds to the layer of positives.
With a mix of value, growth potential and resilience, DAL stock is a compelling addition to any portfolio. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.