Delta Air Lines DAL stock is relatively cheaper than its peers in the Zacks Transportation—Airline industry, with a Value Score of A. 

Image Source: Zacks Investment Research

The DAL stock is trading at a discount with a forward 12-month P/S of 0.67X compared with the industry’s 1.29X. 

DAL is cheaper in valuation than its fellow industry players, SkyWest SKYW and Copa Holdings CPA, which makes it attractive to investors.

Now, the question is whether it is worth buying at the current price. Let us dig deeper to find out.

DAL Stock Likely to Fly High Through 2025

The stronger-than-expected recovery of air travel demand following the pandemic has been supporting the growth of airline stocks like Delta. While air travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an impressive comeback.

DAL’s CEO Ed Bastian expects air travel demand to remain strong in 2025 “with consumers increasingly seeking the premium products and experiences that Delta provides.” Bastian expects 2025 to be the carrier's most successful financial year. Delta expects current-year adjusted earnings to be more than $7.35 per share. The guidance indicates more than 19% year-over-year growth.

Revenue growth and margin expansion are expected to drive profitability. Delta expects the recently witnessed acceleration in co-brand card spending and air travel demand from corporates to continue in 2025.

Maintaining its strong cash-generating ability, DAL expects to generate more than $4 billion of free cash flow in 2025. This further supports its continuous efforts to reduce debt and bring down the leverage ratio to two times or less.

As a result, analysts are seemingly turning optimistic on the stock and upwardly revising earnings estimates.

Image Source: Zacks Investment Research

Strong DAL Stock Price Performance

Mainly driven by upbeat air travel demand, shares of DAL have performed handsomely in the past year. Shares of Delta have outperformed its industry, fellow industry player American Airlines AAL and the S&P 500 index over the past six months.

6-Month DAL Stock Price Comparison

Image Source: Zacks Investment Research

More Reasons to Be Bullish on DAL Stock

Highlighting its shareholder-friendly stance, DAL’s management resumed paying quarterly dividends of 10 cents per share last year after a COVID-induced hiatus. In June 2024, management announced a 50% hike in its quarterly dividend payout. This was the first dividend increase announced by DAL since the resumption of its quarterly dividend payments last year. Under the CARES Act, airlines were prohibited from paying dividends or buying back shares till Sept 30, 2022.  Following the increase, the new quarterly dividend was 15 cents per share (annualized 60 cents per share). 

Delta’s liquidity position is encouraging. The airline ended fourth-quarter 2024 with cash and cash equivalents of $3.1 billion, much higher than the current debt level of $2.2 billion. This implies that the company has sufficient cash to meet its current debt obligations. DAL's efforts to repay its debts are encouraging, too. As a matter of fact, the company’s times interest earned ratio of 8.4 compares favorably with the industry’s ratio of 4.8.

A good liquidity position gives operational flexibility, while a dividend hike indicates cash flow stability and a shareholder-friendly stance.

Wall Street Average Target Price for DAL Suggests an Upside

Based on short-term price targets offered by 22 analysts, the Wall Street average price target is $81.88 per share, suggesting a 26.5% upside from the current levels.

Image Source: Zacks Investment Research

DAL Stock is a Buy Now

Despite being hurt by high labor costs (expenses on salaries and related costs were up 11% in 2024), we think DAL is well-positioned to dodge the challenge.  Upbeat air travel demand and shareholder-friendly initiatives are supporting growth. DAL’s valuation adds to the layer of positives. 

With a mix of value, growth potential and resilience, DAL stock is a compelling addition to any portfolio. The stock carries a Zacks Rank #2 (Buy) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report

Copa Holdings, S.A. (CPA) : Free Stock Analysis Report

American Airlines Group Inc. (AAL) : Free Stock Analysis Report

SkyWest, Inc. (SKYW) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research