Delta Air Lines (DAL) is likely to be seen as a high-quality long-term holding despite current macro uncertainty, Morgan Stanley said in a note on Thursday.

The firm emphasized that Delta's latest update signals that while growth has stalled, it is far from the "sky is falling" scenario that the market is currently pricing in for airline stocks.

Morgan Stanley highlighted that Delta's management struck a reassuring tone on the earnings call, pointing to strong deleveraging progress, resilient travel demand, and a more disciplined industry backdrop.

These factors, combined with the strength of Delta's premium loyalty business and a reset investor positioning, could place the company near the top of buy lists once risk sentiment improves.

Delta's Q1 results were broadly in line with its pre-announced guidance, with operating income slightly ahead of Morgan Stanley estimates and EPS beating consensus due to better-than-expected cost control. The firm noted that while Q2 EPS guidance of $1.70-$2.30 fell below sell-side forecasts, it likely aligned with or exceeded buyside expectations.

Management's tone and guidance are seen as conservative, particularly given stable demand trends and easing year-over-year comparisons, according to the note.

The firm also pointed to the withdrawal of Delta's full-year 2025 guidance as a reflection of macro uncertainty rather than company-specific deterioration.

Morgan Stanley lowered its price target on the stock to $88 from $95, while retaining overweight rating.

Price: 40.60, Change: -3.67, Percent Change: -8.29