Goldman Sachs initiated coverage of Delta with a “buy” rating and US$25 price target, while Barron’s also thinks that price looks reasonable. Morgan Stanley is even more bullish with a price target of US$27 to US$29.
Delta shares closed at US$19.63 on Tuesday.
For Goldman analyst Robert Barry, the U.S. airline presents an unique opportunity for investors looking at the broader sector, which has retreated somewhat recently.
Delta has above average revenue per available seat mile growth, best-in-class unit costs and less labor cost risk than other legacy carriers, and the strongest free cash flow yield around, he said in a note to clients. Add to that an attractive valuation, and value investors should be interested.
As far as Delta’s reorganization plans go, Mr. Barry says suggestions that it was aggressive because it came at the same time as a hostile takeover defense, will prove unfounded.
“More broadly, we think international demand growth will remain strong and benefit Delta disproportionately for years, because it has more widebody aircraft available to meet such demand growth,” he added.
Delta is a member of Goldman’s America’s Buy List.