Delta Air Lines price target raised to $56 by Jefferies on stable demand

Jefferies raised its price target on Delta Air Lines to $56 from $46, maintaining a Hold rating, citing stable travel demand and easier TRASM comparisons in Q3 due to last year's CrowdStrike outage; the firm increased its Q2 EPS estimate to $2.10, though noted softness in Main Cabin bookings and shorter booking curves. Despite the raised price target, Jefferies' Q3 EPS forecast of $1.27 is below consensus, and they project 2025 EPS at $5.35, while Delta faces potential headwinds from new tariffs on imported aircraft and parts.

Analysis

Jefferies has increased its price target for Delta Air Lines (NYSE:DAL) to $56.00 from $46.00, while maintaining a Hold rating, primarily due to stable travel demand featuring "pockets of greenshoots" for close-in summer holiday bookings. According to InvestingPro data, Delta, currently trading at a P/E ratio of 8.76, appears undervalued based on its Fair Value analysis. Jefferies also revised its second-quarter earnings per share (EPS) estimate for Delta upwards to $2.10 from $1.90, which falls within Delta’s own guidance range of $1.70 to $2.30. The airline is expected to benefit from easier total revenue per available seat mile (TRASM) comparisons in the third quarter, stemming from the CrowdStrike outage experienced in the prior year. Delta has demonstrated strong profitability, evidenced by trailing twelve-month EPS of $5.70 and revenue of $61.94 billion. However, Jefferies simultaneously highlighted ongoing softness in Main Cabin bookings, accounting for approximately 40% of Delta’s revenue, and noted that booking curves remain shorter due to macroeconomic conditions. Consequently, Jefferies projects a Q3 TRASM decline of 2.4%—an improvement from the estimated 2.6% decline in Q2—and forecasts an adjusted Q3 EPS of $1.27, below the consensus estimate of $1.46, though suggesting this might be the low end of Delta's potential guidance. Their 2025 EPS forecast for Delta is $5.35. Contrasting Jefferies' caution, InvestingPro analysis indicates a strong analyst consensus with a 1.5 rating (Strong Buy). Recent developments also include a significant warning from Delta about potential new tariffs on imported airplanes and parts, which could disrupt its aircraft acquisition strategy, having received 47 Airbus aircraft from Canada, Germany, and France in 2023 and 2024. On a positive note, Delta reported first-quarter EPS of $0.46, surpassing both Susquehanna’s $0.40 projection and the $0.38 consensus. This strong performance prompted Susquehanna to raise its price target to $51 (Positive rating), UBS to upgrade Delta from Neutral to Buy with a $66 price target (citing corporate travel recovery and premium/international strength, following an earlier PT increase to $46 with a Neutral rating), and TD Cowen to increase its target to $50 (Buy rating), although TD Cowen revised its full-year 2025 EPS estimate downwards to $4.34 from $5.52 reflecting a more conservative outlook. Delta's competitive strategies and loyalty program are identified as key drivers of its robust financial performance and adaptability in the market.

Key Decisions for Investors

• Investors should carefully evaluate Delta's mixed analyst sentiment, weighing Jefferies' Hold rating and concerns about Main Cabin softness and a below-consensus Q3 EPS forecast against more bullish Buy ratings from other firms and the stock's current P/E ratio of 8.76.
• Monitor upcoming earnings reports for critical updates on Main Cabin booking trends, overall TRASM performance, and management's commentary on the potential financial and operational impact of new tariffs on imported aircraft.
• Consider the InvestingPro "Strong Buy" consensus and Fair Value analysis suggesting undervaluation as potential positives, but remain cognizant of macroeconomic uncertainties affecting booking curves and specific industry headwinds like tariff risks before making investment decisions.