Bear of the Day: Delta Air Lines (DAL)

 Delta Airlines Company OverviewZacks Rank #5 (Strong Sell) stock Delta Air Lines (DAL) is known for its travel services for both passengers and cargo. Delta, the second-largest U.S. airline, links customers to locations in the United States and worldwide. The company follows a “hub and spoke system” with hubs located in cities such as Atalanta and New York. Delta offers a range of seating options and amenities through its “SkyTeam” alliance partnerships. The airline is also renowned for its customer rewards program, SkyMiles Delta. The Inherent Unpredictability of Airline StocksWarren Buffett, the most successful value investor of all-time, once quipped, “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.”As the COVID-19 pandemic reared its ugly head in 2020, Buffett was forced to panic sell $10 billion worth of Delta, American Airlines (AAL) United Airlines (UAL), and Southwest Airlines (LUV) stock. Though Buffett made the mistake of buying airlines in 2016, like every great investor, he learned from his mistake, cut his losses, licked his wounds, and moved on.Below are five reasons the airline industry is as unpredictable as ever. 1.       High Fuel Costs are Bearish for DeltaOPEC’s ongoing production cuts have caused high fuel costs. Because fuel costs are a major input for Delta, the company has suffered lower margins as energy prices have increased.Image Source: Zacks Investment Research 2.       Geopolitical Tensions Hurt Airline IndustryRising geopolitical tensions in Europe and the Middle East present a major “Black Swan” threat to the travel industry should global war escalate further. 3.       Delta Suffers From Price Wars with Low-Cost CarriersWeak pricing power is hurting Delta’s EPS. Discount carriers like Spirit Airlines (SAVE) currently have excess seats available, causing them to lower fares and steal business from larger airlines like Delta.Image Source: Zacks Investment Research 4.       Rising Costs Ex EnergyIn addition to rising fuel expenses, DAL is also burdened with rising non-energy costs. For instance, salaries and related costs jumped 12%. Though rising salaries are not bearish by themselves, I see them as a negative when the stock is performing the way that it has. 5.       Unknowns: IT Outage, Boeing IssuesThe global IT outage blamed on CrowdStrike (CRWD) impacted Delta dramatically, causing the cancellation of thousands of flights. Meanwhile, another unforeseen issue is that Delta has several Boeing (BA) airplanes in its fleet. Boeing planes have seen a plethora of mechanical and safety issues over the past few years. Delta Bear Thesis Continued:Weak Technical PictureDelta is exhibiting troubling relative weakness. The stock is flat for the year, while the S&P 500 is up nearly 18%. Worse, DAL’s chart shows a bear flag pattern emerging on the daily chart.Image Source: TradingView Negative ESP ScoreZacks in-house studies prove that when a stock has a negative Earnings Surprise Prediction (ESP) score combined with a Zacks Rank #3 or worse, like Delta does, the stock tends to underperform over the next year. Weak ConsumerStrength in lending stocks like UpStart (UPST) shows that the average U.S. consumer is weak. Bottom LineThe airline industry is notoriously unpredictable. Rising fuel costs and cutthroat competition make Delta stock and avoid.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant 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 The Boeing Company (BA): Free Stock Analysis Report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report United Airlines Holdings Inc (UAL): Free Stock Analysis Report Southwest Airlines Co. (LUV): Free Stock Analysis Report American Airlines Group Inc. (AAL): Free Stock Analysis Report Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report CrowdStrike (CRWD): Free Stock Analysis Report Upstart Holdings, Inc. (UPST): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks