On Monday, BofA Securities maintained its Buy rating on shares of Delta Air Lines (NYSE: NYSE:DAL), with a constant price target of $55.00.
The decision follows a significant operational disruption Delta experienced due to a CrowdStrike (NASDAQ:CRWD) outage last month, which led to over 5,500 flight cancellations.
The financial impact of this event on the airline is estimated to be around $500 million, as per BofA's analyst.
The analyst noted that Delta was the most impacted airline by the CrowdStrike outage, necessitating a revision of the earnings per share (EPS) estimates for the third quarter of 2024 and the full year. The updated EPS forecast for Q3 2024 has been adjusted to $1.23, down from the previous estimate of $1.83. Similarly, the full-year 2024 EPS estimate has been revised to $5.62 from the earlier projection of $6.20.
Despite the recent setback, the firm's long-term outlook for Delta Air Lines remains positive. The analyst emphasized that the EPS estimates for 2025 and 2026 are unchanged, reflecting the belief that the impact of the outage is short-term in nature.
BofA Securities expects that investors will look past the temporary challenges caused by the outage.
InvestingPro Insights
As Delta Air Lines (NYSE: DAL) weathers the financial turbulence caused by the recent CrowdStrike outage, BofA Securities' unwavering Buy rating and $55 price target may find support in some of the airline's current financial metrics and market behavior. According to InvestingPro, Delta boasts a strong shareholder yield, which could signal management's commitment to returning value to investors, even in challenging times. Furthermore, the airline is currently trading at a low P/E ratio of 5.66, pointing to potential undervaluation relative to near-term earnings growth.
InvestingPro Data shows Delta's market capitalization stands at $25.54 billion, with a P/E ratio adjusted for the last twelve months as of Q2 2024 at 6.25. While the stock has experienced a dip with a 1-month price total return of -13.15%, it's worth noting that analysts predict the company will be profitable this year, with a profitable track record over the last twelve months. This could suggest room for recovery as the market digests the short-term impacts of the outage.
For investors seeking a deeper dive into Delta's financial health and future prospects, InvestingPro offers additional insights. Currently, there are 7 more InvestingPro Tips available, which could further inform investment decisions. These tips include analysis on Delta's position within the Passenger Airlines industry, a look at its short-term liquidity, and recent stock performance trends. Interested readers can explore these valuable tips at https://www.investing.com/pro/DAL.
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