Delta Airlines Stock: Navigating Growth, Profitability, and Market Challenges
Delta Air Lines (NYSE: DAL) has experienced a sharp 13% decline over the past week, significantly underperforming the S&P 500’s more modest 3% pullback. The broader airline sector has been under substantial pressure, with United Airlines dropping 12%, American Airlines plummeting 14%, and JetBlue retreating 7%.
This sector-wide downturn can be attributed to two primary factors: the broader market volatility triggered by the Trump administration’s new tariff implementations, and escalating trade tensions, coupled with a critical revelation in U.S. consumer spending data. Notably, the recent economic indicators reveal the first consumer spending contraction in two years, sending ripple effects through the airline industry and dampening investor sentiment. [1]
Despite this recent underperformance, DAL stock remains 70% higher when viewed over a longer timeframe from early 2023. This can primarily be attributed to:
- a 40% rise in the company’s P/S ratio to 0.57 now, versus 0.41 in 2022;
- a 22% rise in the company’s revenue from $51 billion to $62 billion; partly offset by:
- a 1% rise in total shares outstanding to 644 million.
We’ll delve into the specifics of these factors. Our dashboard on Why Delta Air Lines Stock Moved has more details. While DAL stock has had a great run, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
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Image by Cor Gaasbeek from Pixabay
Delta’s Growth Trajectory Amid Economic Headwinds
Delta’s revenue growth has been primarily fueled by capacity expansion. The airline experienced a significant 24% increase in available seat miles (ASM), complemented by modest improvements in passenger yield (up 0.5%) and a notable 150 basis point enhancement in occupancy rate compared to 2022. Additionally, the company’s ancillary revenue streams showed resilience, with cargo and other sales growing 4% during the same period.
The aviation industry witnessed a substantial rebound in travel demand following the pandemic-related lockdowns of 2020 and 2021, with robust passenger traffic sustaining itself over recent years. However, the economic landscape presents emerging challenges. Persistent inflationary pressures have dampened consumer confidence, which has now declined for three consecutive months as of February. [2] This trend is underscored by a 0.2% reduction in consumer spending in January—the first such contraction in two years.
Investors are increasingly concerned that potential consumer spending pullbacks could negatively impact airline revenues, with international routes appearing particularly vulnerable to potential demand fluctuations.
DAL Operating Income
Delta’s Financial Renaissance: Margin Expansion and Investor Confidence
Delta’s financial resurgence has bolstered investor sentiment, reflecting a compelling narrative of growth and operational efficiency. The company has not only demonstrated robust revenue growth but also significantly enhanced its profitability. Between 2022 and 2024, Delta’s operating margin expanded from 7.2% to 9.7%, signaling strategic improvements in cost management and operational performance.
This operational enhancement translated directly to the bottom line, with adjusted earnings nearly doubling from $3.20 in 2022 to $6.16 in 2024. Delta’s price-to-sales ratio growth, from 0.4x in 2022 to 0.6x now, reflects the market’s positive assessment of its financial trajectory.
Delta Stock: Valuation Potential and Strategic Outlook
Delta’s stock is currently trading at $55, with a price-to-sales ratio of 0.6x, consistent with its four-year average. We believe there’s a compelling case for valuation multiple expansion. Recent trends demonstrate consumers’ resilience in travel spending, maintaining robust airline demand despite fluctuating economic indicators.
The airline industry has shown remarkable strength, with corporate travel spending in the U.S. experiencing rapid growth. Delta has simultaneously strengthened its financial position, reducing total debt from $31 billion in 2022 to $23 billion currently, which enhances its financial flexibility.
However, investors should be aware of inherent risks, with fuel prices presenting the most significant challenge. Fuel expenses constitute approximately 20% of Delta’s operating costs, meaning geopolitical tensions or market disruptions that drive fuel prices higher could directly impact the company’s profitability.
We estimate Delta Air Lines’ valuation to be $77 per share, representing a potential 40% upside from current levels. We recommend investors consider this opportunity during the current market dip for potential long-term gains. The strategic combination of sustained travel demand, debt reduction, and operational efficiency positions Delta favorably in the current market landscape.
While DAL stock could benefit from an upward revision in valuation, consider the High-Quality Portfolio, a carefully chosen group of 30 stocks that has consistently surpassed the S&P 500’s returns over the past four-year period.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| DAL Return | -9% | -9% | 23% |
| S&P 500 Return | -3% | -2% | 158% |
| Trefis Reinforced Value Portfolio | -3% | -5% | 651% |
[1] Returns as of 3/5/2025
[2] Cumulative total returns since the end of 2016
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Notes:
- US consumer spending posts first drop in almost two years, Lucia Mutikani, February 28, 2025, Reuters [↩]
- Trump policy concerns send US consumer confidence plummeting to eight-month low, Lucia Mutikani, Feb 26, 2025, Reuters [↩]