While a surge in domestic leisure travel helped Delta Air Lines (DAL) turn a profit in the second quarter, investors continue to be worried about its growth prospects due to the rapid spread of the COVID-19 Delta variant. As a result, the stock’s price has declined by more than 10% over the past three months. So, let’s discuss if it is wise to buy DAL shares on the dip.
Delta Air Lines, Inc. ( DAL ) reported $652 million in net income in its fiscal second quarter (ended June 30, 2021). It is the first quarter for which DAL has reported a profit since the onset of the COVID-19 pandemic. U.S. government aid and a surge in domestic travel in the summer have helped the airline generate a profit in its last reported quarter. The Atlanta, Ga.,-based company is also seeking to cut its pandemic debt burden with a bond call.
However, the stock has retreated 10.6% over the past three months and 6.2% over the past month to close yesterday’s trading session at $41.67.
DAL’s business travel and international travel segments, which are more profitable, higher-margin businesses, continue to be impacted by the spread of the coronavirus Delta variant. Furthermore, many investors are worried about the possibility of business travel failing to return to pre-pandemic levels with advancing technology facilitating improved remote work arrangements. There has also been a tempering in hedge fund sentiment toward the stock lately. So, its near-term prospects look uncertain.
Here’s what we think could influence DAL’s performance in the near term:
Positive Developments
DAL announced on July 26 that it plans to more than double the number of daily flights between the U.S. and Canada beginning September because Canada is reopening its borders to fully vaccinated U.S. travelers for the first time in over a year. In addition, DAL and Kenya Airways PLC expanded their codeshare agreement last month, increasing the choice of destinations offered by the company in Africa and extending Kenya Airways’ reach in North America via the U.S.’ New York-JFK gateway.
