Delta Airlines(DAL:NYE) Berenberg downgrades to hold

STA Research
by: STA Research

Berenberg’s analyst Adrian Yanoshik  today downgraded Delta Airlines to Hold from a Buy rating, and gave the stock a $32 target.  The cut comes on the back of the firm’s concern over valuation and the headwinds the industry faces going into a possible second wave of the coronavirus coming into the fall and winter season.

Delta just recently eliminated it’s ticket changing fees, in order to attract more business as it makes it easier for bookings to be altered if the need arises without penalty.

STA Research(stocktargetadvisor) has a average target of $40 on the stock, and a consensus Buy rating. STA’s view of the stock is Bullish with a score of 7.3 out of 10, where 0 is very bearish and 10 very bullish.

 
What to like:
High market capitalization
This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.
Underpriced compared to earnings
The stock is trading low compared to its peers on a price to earning basis and is in the top quartile. It may be underpriced but do check its financial performance to
make sure there is no specific reason.
Superior capital utilization
The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.
Superior return on assets
The company management has delivered better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile.
Positive cash flow
The company had positive total cash flow in the most recent four quarters.
Positive free cash flow
The company had positive total free cash flow in the most recent four quarters.
Superior Earnings Growth
This stock has shown top quartile earnings growth in the previous 5 years compared to its sector.
High Gross Profit to Asset Ratio
This stock is in the top quartile compared to its peers on Gross Profit to Asset Ratio. This is a popular measure among value investors for showing superior returns in the long run.

 

What to not like:
Overpriced compared to book value
The stock is trading high compared to its peers median on a price to book value basis.
Overpriced on cashflow basis
The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.
Highly leveraged
The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and management statements. Sometimes this is high because the company is trying to grow aggressively.

 

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