Can Delta Stock Turn Positive With Some Stimulus?

Delta Stock
Delta Stock

An analyst confirmed that there is a fat chance of earning well for Delta Air Lines in Jan 2020. This means a good chance for a huge profit margin for the Delta stock investors.

According to a report of Barron’s analyst Jamie Baker from JP Morgan too confirmed the aforementioned statement while he also mentioned United Airlines. Both airlines are believed to go ahead of all the other airlines in profitability.

The reason for this is because both the airlines only need their demands to reach 45-50% of the demands of last year. This percentage is much lower as compared to the other airlines that fall under the domestic category.

Recent Happenings

Losses were reported by Delta around mid-October this year and the cash burn of the company was lower as compared to the last Q3 2019. For example, the average Q3 cash burn was $24 million per day while that of the last quarter was $43 million. 

According to Delta, the September cash burn on average was just $18 million which is 25% less than the quarter’s average. But not everything is included in them, like the programs for separation and early retirement payment of $18 million.

Ed Bastian who is the CEO of Delta gave a very positive statement over a conference call. According to him, the airline company was looking forward to having the per day daily cash burn rate of $10 million at the end of 2020 along with a healthy cash flow sight by the new year’s spring. Not only that, but the company is also having clear talks on achieving positive cash flow by June 2021 for Delta stock.

However, it is strictly not to be forgotten that the same kind of positivity was shown by them to the investors in the last quarter. This means that the investors must be on their toes.

With all the charges incurred on Delta, which is somewhere between $150-250 million, total liquidity will still be about $19.5 by the end of December, which is very high.

Expectation vs Reality For the Delta Stock Investors to Remember

The worst thing about reality is that it gets in the way!

Let’s look at the practicality of situations –

  1. The UK, Europe, and some parts of the US still have rising cases of the coronavirus.
  2.  Unfortunately, the vaccine is not ready yet, and even after it gets ready, it will take a while to be easily available until the summer of 2021. 

These two points are enough to comprehend the fact that the cash flow for the company is very likely to halt until the next summer. 

How To Actually Deal As A Delta Stock Investor

As per reports, 17 analysts gave the consensus price target per share for Delta stock at $45.47. This represents 16.1% in the average annual gain even if it takes December 2022 to reach that price which is a beneficial ROI for those investors who are patient.